The U.S. Dollar is on a fast appreciation track this morning as markets digest a loaded week offering President Trump’s economic plan and executive orders geared toward infrastructure. Stock indexes are flourishing, especially now that the Dow Jones reached over 20,000 points, an occurrence that marks the optimism based on the prospects of expansion. Trans-continental pipelines, more hotels, and border wall projects are most certainly signs of upcoming construction that will employ more and lead to higher consumer spending. Thus far in January, dollar movements are mixed although there seems to be faith in the path being forged.
Jobless and Continuing Claims are up from last week, but the consistency of the labor market is not going to be questioned. At 9:45 and 10AM we’ll see the release of Services & Composite PMIs as well as New Home Sales figures. Entering the first day after the breakthrough in stocks, we’ll monitor if the greenback follows a positive correlation with advances in equities.
Although the UK’s Gross Domestic Product for Q4 2016 came in at an unexpectedly high 0.6% pace of growth, the Pound lost ground and matched its gains from the day prior. The frequent up and down fluctuation in Sterling is indicative of the struggle to foresee what comes next with Brexit weighing over any economic progress Britain may have experienced since the referendum last year.
More importantly, economists are quick to point out that the growth in the economy has only been in services, while construction and other sectors remain stagnant or facing downward pressure. Prime Minister Theresa May will speak with President Trump and any statements on bilateral collaboration on economic as well as political stances could affect GBP/USD pair.
The Euro fell after enjoying a full week of strengthening based on mixed data. PMI’s are up, but confidence in what this year may hold for business activity is down. It is clear after this week, that President Trump is serious about re-negotiating trade deals and nullifying or avoiding staying as a signatory on planned, framed agreements.
The Euro-zone and America were also working on a comprehensive deal, the Transatlantic Trade and Investment Partnership (TTIP), that included resolute efforts in exchanging food with common standards and other items, but this has no future. As Brexit looms along with political risks for each individual member state, expect Euro to behave negatively, however, if indicators continue to perform well there will be spikes in the shared currency that we feel will be short-lived.