The U.S. Dollar jumped overnight, most notably against its European counterparts.
The Bloomberg Dollar Index rose to its highest level of the week with some analysts pointing to concern over the relationships between Saudi Arabia and the U.S. as a reason for a slide in risk sentiment. U.S. equities soared yesterday to claw back some of its losses but futures point to a lower open today.
This morning’s docket showed that housing starts fell 5.3% in September, besting a dreary expectation of a 5.6% drop. A decline was expected due to the effects of Hurricane Florence that made landfall in the Carolinas last month.
This afternoon, the meeting minutes from the last Federal Reserve meeting will be released. At their September meeting, the central bank raised their benchmark rate by 25 basis points for the third time this year. Market participants will scour the minutes for hints about not only if the Fed will boost rates again, but also for clues to what level the Fed will finally pause their hiking cycle (likely in 2020, near 3.25%). President Trump continued his attack on the independent institution, calling the central bank his “biggest threat” because he believes the monetary tightening is happening too fast.
EUR/USD drifted lower overnight on widespread greenback strength. European consumer prices met expectations. Inflation is 2.2% year over year and 0.9% for the core reading. The print shows that the European Central Bank may be able to lift interest rates during the second half of 2019, but without a pop higher it seems less likely.
The British pound dropped against the U.S. dollar overnight following the release of lower than expected inflation data. U.K. year over year CPI fell to 2.4% in September, from 2.7 in August. The overnight move essentially erases the Sterling’s gains following strong wage data from yesterday. While the data drove the sterling lower, expect traders to quickly turn their attention back to Brexit developments. Prime Minister Theresa May will address EU leaders before dinner tonight that will kick off the EU summit in Brussels.