Global Forex Market

THE dollar ended the week appreciating by 0.82% to 92.11 supported by tax reform talk from Trump’s administration and stronger economic data.

Both inflation and core inflation exceeded expectations at 0.4% monthon-month (m-o-m) and 1.7% year-onyear (y-o-y) respectively, causing increased expectations of another rate hike in 2017. US JOLTs job opening rose to a record high of 6.17 million in July while initial jobless claims fell unexpectedly to 284,000.

The dollar managed to pare losses for the week from the stronger pound post-BoE meeting and renewed geopolitical tensions surrounding North Korea which threatened both Japan and the US.

Brent crude oil continued its bullish bias rising 2.73% to 55.25, its highest close since April as hurricane concerns eased and US refineries were expected to resume operations.

Despite Irma, the EIA’s weekly report showed an increase in crude oil inventories by 5.89 million barrels. Additionally, both Opec supplies and the overall global oil supply are narrowing while stronger-than-expected demand growth continues particularly in Europe and the US, putting an upward pressure on oil prices.

The euro fell by 1.06% to 1.191 against the greenback despite industrial production rising 0.1% m-o-m in July, up from a decrease of 0.6% in June.

Year-on-year industrial output rose less than anticipated by 3.2% while trade surplus fell 8% y-o-y to 26.6 billion in June as imports rose faster than exports.

Despite ECB vice-president Constancio’s stance that the central bank’s unconventional monetary policy will be maintained, consensus was building around a nearing reduction in monetary stimulus by the ECB as the euro zone grows.

The pound appreciated 1.45% to 1.3391, reaching a one-year high after the BoE kept rates unchanged and hinted that a rate hike is on the cards in the coming months amid accelerating inflation.

UK inflation rose 2.9% y-o-y in August, hitting its joint highest in more than five years while unemployment declined to its lowest since 1975 at 4.3%.

Meanwhile, Brexit negotiations progressed as the EU repeal bill won first Commons vote. Despite wage growth falling below expectations, the sterling ended the week on a higher note.

The yen weakened against the greenback by 2.17% as North Korea tensions re-emerged after it fired a missile over Japan. Meanwhile, Japan producer price index rose to 2.9% y-o-y in August, compared to 2.6% in July while industrial production rose in line with expectation to 4.7% y-o-y in July.

All Asia-ex Japan currencies depreciated against the greenback except the baht and Hong Kong dollar. The Philippine peso declined by 0.80% as unemployment rate rose 5.6% q-o-q in 3Q2017 and industrial production fell 2% y-o-y in July despite trade deficit narrowing to its smallest gap since February 2016.

In China, the yuan slid by 0.9% after its central bank relaxed currency controls. Both industrial production and retail sales rose below expectations at 6% y-o-y and 10.1% y-o-y respectively. Meanwhile, the won fell 0.62% after North Korea’s missile launch and as unemployment rose above expectations to 3.8% in August.

The ringgit weakened slightly by 0.04% despite strong economic data as industrial production grew by 6.1%y-o-y in July, above expectations of 5.3% while retail sales reached an all-time high at 14.1% y-o-y following a 13.9% gain in June.