The U.S. Dollar is trading in mostly positive ranges to end October following a week of solid economic data that improved the chances of a Fed hike by end of the year. Against its top ten rivals, the greenback rose by over 2.0% throughout the month backed primarily by steady domestic indicators and a worsening situation as it pertains to Brexit talks. Markets have not found a definite direction, wildly swinging along with U.S. election woes. The risk-aversion helped the dollar dearly.
Personal Income and Personal Spending this morning were released and registered close to expectations. Personal Income did not expand at the estimated 0.4% pace, but came in at 0.3%. Meanwhile, consumption increased with spending improving at 0.5% over the forecast 0.4%. Personal Core Expenditures, the Fed’s preferred method of gauging inflation, met economists’ predictions at 1.7% year-on-year. We will see the impact of these numbers as the FOMC expresses its thoughts in two days.
The Pound remains weak ahead of the Bank of England meeting on Thursday. Our friend Mark Carney’s position as BOE Governor may be on the line as Prime Minister Theresa May defends the idea of keeping him in charge. Many lawmakers feel Carney has been advocating fear mongering following the Brexit referendum by pointing out the financial obstacles the separation from the European Union would bring along. Sometimes doing your job gets you in trouble.
Although Britain’s fundamentals have shown resiliency in the midst of Brexit uncertainty, Sterling’s depreciation has highlighted the discomfort among investors and other market participants. GBP fell by 7.0% in October and has potential for further losses as the UK comes closer to fully leaving the single market.
The Euro is down, but its losses have been minimized by a streak of strong data in the past few weeks. Although CPI may go expand slowly or contract in one country, the next country’s numbers seem to be record bests. Overall, the Euro-zone is slowly climbing back from its underperformance during the earlier parts of the year.
The common currency declined 2.6% in value, but may be due to stay in these ranges as Spain resolves its unstable parliament bringing an end to political gridlock in a very important member economy on the periphery.