US dollar index suffers worst weekly decline since July ahead of elections

The US dollar ended the week lower and at the lows despite rising expectations of a Federal Reserve rate hike in December. It even failed to recover ground on Friday after the US employment report showed positive numbers that support the move from the FOMC. The political effect weakened the greenback. 

The NFP report showed a gain of 161K jobs (little below expectation) but revisions added 44K to the previous months and average hourly earnings rose 2.8% (annual), the highest wage growth rate since 2009. The US dollar initially appreciated but then turned to the downside. Volatility remained low on Friday despite the employment report. Next Tuesday’s presidential elections have taken all the attention. 

The US dollar index broke below the 97.00 handle and bottomed at 96.90, the lowest level in almost a month. The index is about to end the week at the lows and under pressure, extending the bearish correction after reaching 8-month lows the week before at 99.04. During the week it dropped 1.35%, having the worst weekly performance since July. 

The best performer in the currency market during the week was the Pound that rose sharply boosted by the High Court ruling on Article 50 and also following the Bank of England statement, that showed a more balanced approached, removing the easing bias. 

Next week price action is likely to be defined by the results of the US presidential election. Analysts see a potential sharp decline in the short-term of the US dollar against majors (particularly the yen) if the winner is Donald Trump.  

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