The U.S. dollar is enjoying wide-spread strength this morning following hawkish comments from voting Fed president Harker. Harker held that a March rate hike should be considered and reaffirmed the Fed’s stance that three interest rate hikes should be on this year’s docket. Tempus believes that the central bank will hold current policy next month and that three interest rate hikes are unlikely. Nevertheless, the seemingly hawkish stance has lifted the greenback and the Bloomberg Dollar Spot Index is up 0.8%.
This morning’s second tier data showed that the U.S. trade deficit narrowed in December for the first time in three months. The monthly shortfall shrank 3.2%, according to the Commerce department. For all of 2016, the deficit increased 0.4%. A number of analysts have urged market participants to keep an eye out for a reaction from the Trump administration. Over the past two weeks, officials and Trump himself via Twitter, have commented on the necessity of a weaker dollar to improve conditions for U.S. exporters.
The Euro is also weaker this morning and is testing a one-week low against the U.S. dollar. Yesterday, ECB President Mario Draghi clashed with European parliamentary members and defended the central bank’s dovish quantitative easing program amidst a backdrop of rising inflation pressures.
After a glowing factory orders print yesterday, the Germany economic docket has disappointed this morning. German industrial production fell by 3.0%, the first decline in three months.
The British pound is the biggest loser overnight, falling more than 100 basis points versus the U.S. dollar and touching a two-week low. Economic data released this has been underwhelming as growth in consumer spending was down in January compared to the year prior. But sterling sell-off can mostly be attributed to renewed worry surrounding the “Brexit.” The Article 50 bill, which would officially trigger the exit, is expected to remain in the House of Commons through Wednesday. The bill remains on track to be signed in the coming weeks even as many questions and uncertainty surround the process.