Dollar Rises On Data Boost

(RTTNews) - Strong economic data from the U.S. and safe haven demand attributed to renewed geopolitical tensions boosted the U.S. dollar during the week ended January 16. Though the larger-than-expected decline in payrolls growth as well as the escalation in tensions between the White House and the Federal Reserve caused the greenback to weaken at the onset of the previous week, geopolitical tensions and strong economic data aided its rebound.

The dollar's initial weakness, triggered by weak payrolls data as well as the U.S. government's criminal investigation involving Federal Reserve Chair Jerome Powell turned out to be short-lived as fresh tariff warnings by the U.S. on goods from countries "doing business" with Iran and the spike in oil prices following the deadly anti-government protests in Iran added geopolitical risk premiums. Strong economic data that followed helped the dollar close the week on a positive note.

Data released by the U.S. Bureau of Labor Statistics on Tuesday morning showed headline annual inflation remaining steady at 2.7 percent in December on expected lines. The core inflation which was forecast to edge up to 2.7 percent from 2.6 percent in November unexpectedly remained steady. Month-on-month inflation recorded 0.3 percent in line with consensus estimates whereas the core component surprisingly recorded 0.2 percent versus 0.3 percent expected by markets. The data tempered rate cut expectations and helped the dollar index erase Monday's losses.

Data released on Wednesday showed producer prices in the U.S. increasing 0.2 percent month over month in November, accelerating from a 0.1 percent increase in October and matching market expectations. The core producer prices however remained unchanged versus the 0.3 percent increase in October and market expectations of an increase of 0.2 percent. Data released on the same day also showed retail sales in the U.S. rising 0.6 percent month-on-month in November, rebounding from a revised 0.1 percent decline in October. The largest gain since July surpassed forecasts of an increase of 0.4 percent.

Amidst the whipsawing market conditions, the six-currency Dollar Index, gained 0.26 percent during the week ended January 16. The index which measures the Dollar's strength against a basket of 6 currencies closed at 99.39 versus 99.13 a week earlier. Though the index had dropped to a low of 98.67 on Monday, it reclaimed a level of 99.49 on Thursday.

Amidst the dollar's rebound, the EUR/USD pair ended the week on a negative note, closing 0.34 percent lower at 1.1599 versus 1.1638 a week earlier. During the week, the pair ranged between the high of 1.1698 recorded on Monday and the low of 1.1584 touched on Friday.

The GBP/USD pair slipped 0.15 percent during the week ended January 16 amidst a better-than-expected GDP update. The sterling declined to $1.3383, from $1.3403 a week earlier after touching a high of $1.3496 on Tuesday and a low of $1.3361 on Thursday. Data released on Thursday showed the U.K. economy expanding by 0.3 percent month-on-month in November, rebounding from a 0.1 percent contraction in October and exceeding market expectations of a growth of 0.1 percent.

The Australian Dollar edged down 0.06 percent against the U.S. Dollar during the week ended January 16. The pair ranged between the high of 0.6726 recorded on Tuesday and the low of 0.6667 recorded on Thursday but eventually closed at 0.6683. The pair was at 0.6687 a week earlier. The Aussie's weakness against the dollar came amidst data showing the Westpac consumer sentiment slipping further in January on interest rate worries.

The yen weakened and the USD/JPY pair added 0.15 percent during the past week ended January 16 amidst reports that Japanese Prime Minister could call early snap elections. The pair increased to 158.12, from 157.89 a week earlier. The week's trading ranged between the low of 157.53 recorded on Monday and the high of 159.46 recorded on Wednesday.

The U.S. Dollar has weakened against major currencies while the U.S. President intensified the push to take control over Greenland. The 6-currency index is currently at 98.48 versus 99.39 at close on Friday even as safe haven demand lifted gold more than 3 percent overnight to a fresh all-time-high of $4,742. The safe haven demand for Swiss franc has caused the USD/CHF pair to decline to 0.7907 from 0.803 on Friday. The EUR/USD pair has increased to 1.1725 from 1.1599 on Friday. The GBP/USD pair has rallied to 1.3472 from 1.3383 at the end of the previous week. The AUD/USD pair has also rallied to 0.6731 from 0.6683 on Friday. The USD/JPY pair has decreased to 157.81 from 158.12 at the close of the previous week.