The U.S dollar traded in a mixed range overnight, giving up its gains against the Euro.
The Bloomberg Dollar Spot Index is headed for its first weekly loss in three as the Fed held a slightly dovish outlook for interest rates in 2018. Still, the central bank expects to raise interest rates three times in the New Year.
The greenback was also under slight pressure overnight over renewed uncertainty over the timing of an agreement on the U.S. tax reform bill. Florida Senator Marco Rubio was the latest GOP member who voiced objections. Republicans are attempting to keep the cost of the program under $1.5 trillion, a limit set by Congress. Any additional consideration may add to the cost and risks pushing the bill over limit. Some expect the bill to come to a vote as early as next week.
The Empire Manufacturing survey showed a slightly disappointing reading of 18.0 v. expectations of 18.7. The print did not move the greenback. Later this morning, industrial production is expected to show a 0.3% increase in November, down from 0.9% in the month prior.
The Euro recovered some of its losses against the U.S. dollar overnight but remains in largely familiar ranges from earlier this week. The Euro fell yesterday as European Central Bank President Mario Draghi spoke. While the central bank seems to be gaining confidence in the growth outlook for the currency bloc, Draghi did not imply any changes to the broader policy outlook. The current monetary stimulus package is set to expire in September of 2018. Yesterday’s policy meeting will be seen as a “non-event.”
The British pound fell half a percent against the U.S. dollar and such sharp swings and heightened volatility are becoming common place in the GBP/USD pair. EU leaders and the British government are expected to officially agree that the first phase of Brexit negotiations have advanced enough to move on to the next round. While the “divorce settlement” is far from a done deal, the two parties can now work on negotiating future trade relationships. Expect slow developments on this front but the sterling will continue to be at the mercy of “headline risk.”