Last week on Friday, the US Dollar jumped broadly against its major counterparts, reinforced by increased optimism about the prospects for US tax reforms. The US Senate approved last Thursday a budget blueprint for the 2018 fiscal year that will pave the way for Republicans to pursue a tax-cut package without Democratic support. Moreover, the number of Americans filing for unemployment benefits dropped to 222K, its lowest level in more than 44-1/2 years last week, pointing to a rebound in job growth after a hurricane-related decline in employment in September 2017.
Last Thursday, Sterling fell against the Dollar, after British retail sales fell unexpectedly to 0.8% in September 2017, dragging quarterly growth to its weakest annual rate since 2013 and adding to uncertainty over the Bank of England’s interest rate outlook. Moreover, dovish comments from BoE policymakers weighted on the Pound. Although investors are pricing in an 80% chance of a rate hike next month, doubts are growing about whether the BoE will continue to tighten policy next year.
Meanwhile, the New Zealand Dollar slipped by the most since 2016 against the Dollar on concerns that the new labour coalition will take a harder stance on immigration and foreign investment than the outgoing centre right government. Analysts are focusing on potential changes to New Zealand’s monetary policy framework under the new government. The Labour Party has said that it wants to add employment to the central bank’s mandate, which would mark a big change for the Reserve Bank of New Zealand.