Daily Market Update

U.S. Dollar dwindling before last Fed meeting of 2018

December 19, 2018

The U.S. Dollar stumbled overnight and is trading weaker against some of its major counterparts ahead of the Federal Open Market Committee Meeting Announcement later today at 2:00PM.

Overview

A much awaited last Fed announcement of the year is expected to produce another interest rate hike that many oppose. The Fed’s outlook, as of right now, is to hike today and three more times in 2019.

The White House and a number of economists have expressed dismay at the idea of adding further borrowing costs because they perceive an economic slowdown and fear recessionary symptoms. Odds of an increment today are at 70.8%, but we expect it to occur while Fed Chairman is likely to stay on course with his assessment that the Fed can afford to continue its monetary policy normalization based on consistent data, especially labor markets.

A bit of a dovish tone is what many expect also and we think that if it materializes, it merits keeping the dollar from gaining, thus ranges may not change drastically and most likely not in the greenback’s favor.

 

What to Watch Today…

  • Existing Home Sales 10AM.
  • FOMC MEETING & PRESS CONFERENCE 2PM

The complete economic calendar can be found here.

 

EUR

The Euro picked up steam adding less than a half percent during the Europe trading session as news of a technical agreement between the EU and the Italian government being reached hit the wire. Nothing is official, but it seems like the past few days of optimism over negotiations did produce a mutually beneficial outcome.

Additionally, data painted a slightly better picture than expected for Germany’s Producer Price Index, which expanded 0.1% in November instead of contracting by that much as forecast. Also, overall Euro-zone Construction Output figures revealed a faster pace of production than previously thought with the yearly average now at 4.8% over the 4.6% estimate. It may come slowly, but we do predict some better times ahead for the shared currency, but other growth factors have got to pick up.

GBP

One hundred days until the Brexit deadline of March 29th. The Bank of England is meeting tomorrow and will give their take on where they see the country going into 2019 and whether an accommodative environment needs to be fostered as Britain prepares for a tough Q1. BOE Governor Mark Carney’s warnings of a tumultuous process with negative effects are here, cannot be doubted any longer, but it is worth noting he surprised markets last time when he gave a relatively positive take on economic momentum.

However, he has always emphasized the importance of having a deal, something done, and yet here we are clueless about how the next 100 days will go: A referendum asking the question again? A reversal of the process from a new government administration? An ugly and hard Brexit? A new Norway-type deal? As England’s own band Queen said: “Under Pressure.”

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