Daily Market Update

Few Headlines and Troubles Elsewhere Steady the U.S. Dollar

October 17, 2017

The U.S. firmed up yesterday afternoon and overnight pushing the Bloomberg Dollar Spot Index to its highest level in a week. The greenback’s bump is being attributed to news that President Trump may favor Stanford University economist John Taylor as the next Fed Chairman.

USD

The U.S. firmed up yesterday afternoon and overnight pushing the Bloomberg Dollar Spot Index to its highest level in a week. The greenback’s bump is being attributed to news that President Trump may favor Stanford University economist John Taylor as the next Fed Chairman.

The news came as a bit of a surprise because Trump is a proponent of low interest rates and Taylor is the biggest hawk of potential candidates. A Taylor-led Fed would likely mean higher interest rates, hence the dollar rally. Trump is expected to interview current Fed Chief Janet Yellen for a possible re-nomination later this week.

Later this morning, industrial production is expected to have gained 0.3% in September, up from a contraction of 0.9% in the month prior. This afternoon, Philadelphia Fed President Patrick Harker will give a speech in Pennsylvania. While the speech is unlikely to focus on monetary policy, the Q&A following the speech could cause volatility.

 

EUR

The Euro was quiet overnight, falling 0.2% against the U.S. dollar. The common currency is lower for the fourth consecutive day, which is its worse run in five months.

Eurozone CPI was unchanged from a preliminary report of a 0.4% gain in the month of September. The German ZEW survey registered a slightly weaker than expected print. However, the ZEW overall remains at elevated levels and shows European’s largest economy is in a strong position.

 

GBP

The British pound was under pressure again overnight as high inflation numbers did little to change future interest rate expectations. The UK Consumer Price Index rose 3.0% year over year, the highest level in more than five years. The print met expectations.

The pound’s fall can be attributed to comments made by policy makers that failed to provide clarity on the prospects of a rate hike next month. BoE Governor Mark Carney stuck to his previous line on the timing of interest rate hikes saying “over the coming month they may be appropriate.” According to OIS, there is currently an 82% change the Bank of England will increase rates in November, but the markets are not pricing in more hikes moving into 2018.

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