The USD traded mixed last week with the initial weakness being mostly eradicated by the end of the week with a mixed bag of data on Friday which saw the better than expected NFP, which came in at 227k vs the expected 170k, out shadowed by a lower than expected Average Hourly earnings m/m which came in at 0.1% vs the expected 0.3%. The initial move was for the USD to strengthen aggressively as the USD index, a measure of the USD`s strength against a basket of currencies, popped above the 100 level. This was however short lived as markets priced in the lower average earnings, which led to a drop back towards the 99 level as markets felt that the impact on inflation would outweigh the benefits of more employment.
Going forward, the USD will remain sensitive to both economic and political factors as markets search for an equilibrium in which both buyers and sellers are happy. From an economic perspective, investors will be on the lookout for signs of weakness or strength with better than expected economic data like to see the USD Index head north as bulls attempt to hold the 100 level while worse than expected data will see the bears resurface to try and capture 99 as they look to turn the medium term trend bearish. From a political stand point, the new President, Donald Trump, has been causing waves as he enacted a restrictive policy on movement from certain countries, effectively banning entry into the US from these destination, which has weakened the USD as uncertainty mounts. However, the weekend saw the motion stopped by a US judge, who deemed the act as unlawful, resulting in the USD reclaiming some ground as investors price in the more favorable investment conditions. Going forward, any bumps in the road, which are deemed as creating uncertainty, will see the USD index tumble while moves which seek to solidify the stability of the US will see bulls head back north for the 100 level.