Dollar Rises Amidst Mixed Jobs Data, Soft Inflation

The U.S. dollar remained broadly resilient during the week ended December 19 amidst a mixed update from the labor market and soft inflation readings from the U.S. The widely expected rate hike by Bank of Japan as well as rising prospects of a Russia-Ukraine peace deal also swayed currency market sentiment.

The U.S. dollar rallied against the euro, the Australian dollar, the Japanese yen, as well as the Canadian dollar but declined against the British pound, the Swiss franc and the Swedish krona.

The Dollar Index, a measure of the Dollar’s strength against a basket of 6 currencies gained 0.20 percent during the week ended December 19. The index closed at 98.60, versus 98.40 a week earlier. Though the Index had dropped to a low of 97.87 on Tuesday, it climbed to a high of 98.75 on Friday.

Data released by the U.S. Bureau of Labor statistics on Tuesday morning showed a job growth of 64 thousand in November and a job loss of 105 thousand in October. The unemployment rate which was expected to be steady at 4.4 percent however increased to 4.6 percent, the highest level since 2021.

Data released by the U.S. Bureau of Labor Statistics on Thursday morning showed headline annual consumer price inflation in the U.S. at 2.7 percent in November. The previous reading related to September revealed a level of 3 percent. Markets had expected a reading of 3.1 percent. Though markets expected a level of 3 percent, the core inflation showed a reading of 2.6 percent only.

Amidst the dollar’s resilience and the ECB leaving borrowing costs unchanged for a fourth consecutive meeting, the EUR/USD pair ended the week on a negative note. The pair closed at 1.1710 versus 1.1740 a week earlier. During the week, the pair ranged between the high of 1.1804 recorded on Tuesday and the low of 1.1702 on Friday.

The GBP/USD pair edged up 0.05 percent during the week ended December 19 amidst Bank of England’s quarter percentage rate cut aimed at addressing the easing inflation and growing signs of economic strain. The sterling rose to $1.3379, from $1.3372 a week earlier after touching a high of $1.3457 on Tuesday and a low of $1.3310 on Wednesday. Data released during the week showed inflation in the U.K. declining more than expected and the unemployment rate rising on expected lines.

The Australian Dollar however slipped 0.62 percent against the U.S. Dollar during the week ended December 19 as the U.S. dollar’s strength and risk aversion weighed on markets. The pair ranged between the high of 0.6662 recorded on Tuesday and the low of 0.6592 recorded on Thursday but eventually closed at 0.6612. The pair was at 0.6653 a week earlier.

The yen weakened and the USD/JPY pair rallied 1.25 percent during the past week ended December 19 that witnessed Bank of Japan’s widely expected interest rate hike. The central bank of Japan raised its key short-term interest rates by a quarter percentage point to 0.75 percent, the highest level since September 1995. The pair jumped to 157.76, from 155.82 a week earlier. The week’s trading ranged between the low of 154.39 recorded on Tuesday and the high of 157.78 recorded on Friday.

At the onset of the current week, the Dollar Index has declined to 98.36 from 98.60 at close on Friday. Anticipation ahead of the second estimate of the third quarter GDP data scheduled to be released on Tuesday and the FOMC minutes a week later lingered, influencing sentiment.

The EUR/USD pair has increased to 1.1750 from 1.1710 on Friday whereas the GBP/USD pair has increased to 1.3440 from Friday’s closing level of 1.3379. The AUD/USD pair has also jumped to 0.6646 versus 0.6612 recorded at close of the previous week. From the level of 157.76 at the end of the previous week, the USD/JPY pair has decreased to 157.11.

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