Dollar's Weak Show Amidst Weak Data

(RTTNews) - The U.S. Dollar recorded a mixed performance during the past week amidst favorable economic data and anxiety ahead of the inauguration of Donald Trump's presidency. The week spanning January 13 to 17 witnessed the greenback weakening against the euro, the Australian Dollar and the Japanese Yen but gaining against the British Pound. The Dollar Index, a measure of the Dollar's relative strength against a basket of six specified currencies also declined during the week.

The Dollar Index, a measure of the Dollar's strength against a basket of 6 currencies closed the week ended January 17 at 109.35, versus 109.65 a week earlier. The Index slipped from the multi-month high of 110.18 touched on Monday in the aftermath of the stronger-than-expected payrolls data to a low of 108.60 on Wednesday, the day the CPI readings for December were released.

Recent data from the U.S. that showed softer-than-expected levels of core inflation, producer price inflation, and retail sales that are expected to increase the headroom available to the Federal Reserve to ease monetary policy, abetted the greenback's decline.

Consumer price inflation update from the U.S. on Wednesday and in particular, the softer-than-expected core inflation swayed currency market sentiment significantly. The core component of the year-on-year inflation which was seen steady at 3.3 percent unexpectedly declined to 3.2 percent. Though annual headline inflation increased to 2.9 percent from 2.7 percent in November, it was in line with market expectations.

While month-on-month inflation which was seen steady at 0.3 percent unexpectedly edged up to 0.4 percent, the core component thereof dropped to 0.2 percent in line with expectations.

The EUR/USD pair rallied 0.26 percent during the week ended January 17 amidst the dollar's weakness and hints from ECB officials of a pursuit of a monetary policy middle path. From the level of 1.0244 on January 10, the pair increased to 1.0271 in a week's time. The week's trading ranged between 1.0178 touched on Monday and 1.0355 recorded on Wednesday.

The sterling however slipped against the greenback by 0.34 percent. The GBP/USD pair ranged between Monday's low of 1.2098 and Wednesday's high of 1.2307. The pair eventually closed at 1.2163, versus 1.2204 a week earlier amidst data that showed an unexpected decline in inflation as well as GDP in the U.K.

The AUD/USD pair strengthened 0.73 percent during the week ended January 17, rising to 0.6190, from 0.6145 a week earlier. The pair recorded the week's low of 0.6131 on Monday and the week's high of 0.6248 on Wednesday. The currency movement came amidst an uptick in Australia's unemployment rate and largest trading partner China's trade data release on Sunday that showed a bigger-than-expected jump in imports and exports.

The yen's strength dragged down the USD/JPY pair by 0.88 percent, to 156.30 from 157.69 a week earlier. However, the pair's weekly trading range was much wider, between the high of 158.23 on Tuesday and low of 154.98 on Thursday. The yen's strength came amidst renewed fears over another rate hike by Bank of Japan as early as this week.

Despite the data-led decline in the U.S. dollar over the course of the past week, the greenback has dropped further in the current week. The six-currency Dollar Index is currently at 108.58, versus 109.35 at close on Friday. Speculations about the intensity and immediacy of Trump's tariff measures and other economic polies continue to hold sway over the currency market.

The EUR/USD pair has rallied to 1.0362 whereas the GBP/USD pair has strengthened to 1.2260. The AUD/USD pair is currently at 0.6233, versus 0.6190 at close on Friday. Ahead of Bank of Japan's interest rate decision due on Thursday, the USD/JPY pair has declined to 155.72.