Daily Market Update

Possible Brexit Deal Dominates Trade; US Inflation Meets Expectations

November 14, 2018

After rallying to a 17-month high on Monday, the U.S. dollar fell yesterday and continued its negative momentum overnight and into our session.

Overview

Attention was focused mainly abroad, namely developments surrounding an apparent Brexit deal in the U.K. However, this morning’s economic docket will shift the attention to our own shores this morning.

The greenback has sold-off mildly in early trading after a report showed that consumer prices met estimates, denying a surprise to the upside that would have benefited the dollar. Consumer prices in the month of October rose 0.3%, a touch higher than September. The so-called core-reading also met estimates, rising 0.2%. Year over year, consumer prices have risen 2.5%.

Federal Reserve Chairman Jay Powell will discuss the economy in Dallas at 6 p.m. Eastern time. As always, analysts will parse his words to see if his outlook on the economy and monetary policy has altered at all. Fed Fund Futures currently show a 77% chance the central bank will raise rates on December 19th. This is also our base expectation.

 

What to Watch Today…

  • Powell Speaks on the Economy at 6 p.m. ET

The complete economic calendar can be found here.

 

EUR

The Euro found a little relief yesterday and this morning but still remains largely under pressure against the U.S. dollar. Italy has refused to budge and amend its budget to meet European Union standards. The current budget shows a deficit of 2.4%, higher than the 2.0% required be the EU. Bloomberg News reports “European commissioners now have to decide whether to kick start a long and complex process that could lead to several billion euros in fines for Italy.” As long as the Italian budget remains up in the air, the Euro’s gains will be limited.

GBP

GBP/USD has zigged and zagged with the prevailing Brexit headlines for months and the past day and a half has been no different. Yesterday afternoon it was reported that the U.K. and the EU agreed on how to avoid a hard border on the Irish border and that the draft deal will be presented to Prime Minister Theresa May’s senior ministers for their approval later today. Today’s cabinet meeting is the latest hurdle and a necessary step before May makes her pitch to Parliament. There are many who already have said they will reject the proposal, making the current draft far from a sure thing. Expect more volatility this afternoon as news breaks from the cabinet meeting.

 

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