The hard numbers show that the USD index against a basket of major currencies fell only 0.2% over the course of the week, even though it felt much worse than that. The pattern of trade was such that the USD made four fresh lows on four different days at 89.99, 89.96, 89.92 and 89.89 which all gave rise to a flurry of Press headlines about the drop. But, just reading through the actual index levels, we can see that only one-tenth of a point separated all four. Sometimes it’s important to look at the scale on the charts rather than to rely on the headlines alone.
The dollar decline again came despite yet another good set of economic numbers. The previous week had seen higher core inflation and retail sales numbers. Last week, industrial production surged +0.9% in December as very cold weather at the end of the month boosted demand for heating. Thursday, we learned that weekly jobless claims decreased by 41k to 220k; their lowest level since February 1973 and the biggest weekly biggest drop since April 2009.
At midnight on Friday, the US government began to shut down; the first time ever that a party which controls the White House, Senate and House of Representatives has overseen a government shutdown. It is the 19th such occasion in the last 40 years. Four of these 19 have lasted just one day with the longest in 1995 lasting 21 days. During the last government shutdown in October 2013, 850,000 federal workers were furloughed, equal to nearly 40% of the government workforce. The shutdown lasted for 16 days, triggered by a disagreement over Obamacare. According to Standard & Poor’s, it cost the economy $24 billion.
Amidst this latest cause for uncertainty, the US Dollar index opens in Asia at 90.35.