Daily Market Update

U.S. Dollar Near Worst Level in Three Years Across the Board

January 19, 2018

The U.S. Dollar is closing its sixth straight week of losses, staying around is weakest level in months and years against most counterparts.

USD

Uncertainty over a budget bill remains even after yesterday’s successful passing in the house of representatives of a temporary funding bill that will keep the government running until February 16th.

The week also witnessed a mix of economic indicators, showing that the economy is expanding its industrial output, yet suffering on the real estate side which dampens outlooks on household consumption. Thus far in 2018, the buck is down 2.2% when compared to the G10 currencies.

Cleveland Federal Reserve President Loretta Mester spoke yesterday and sounded very hawkish, calling for the Fed to hike four times this year. Her sentiment could be a positive if other officials follow suit, perhaps cutting the dollar a break in the process. Next week shall be more influenced by data as we look at Purchasing Managers Index and Durable Goods Orders figures. Yields for the 10-year Treasury bond are now at their highest since 2016, but the accompanying optimism over inflation and higher interest rates is not translating into dollar strength.

 

EUR

The Euro is up by 2.0% thus far this year, lifted by faith in the region’s economic performance and the prospects for tighter policy from the European Central Bank once QE ends in September. Currently, the shared currency is being favored by traders as the dollar overall has hit a 3-year low in value strength.

The ECB is likely going to continue having members speak softly about the merits behind the currency appreciation, but thus far words have failed to inspire any declines. Next week’s meeting will help set a sense of guidance form the ECB, which we predict will have a very cautious tone.

 

GBP

The Pound is at its best level since the Brexit referendum, gaining in fact because of improved chances of working out a trade deal. Dutch and Spanish leaders have pointed out how detrimental the U.K.s complete absence would be to their economies and are hoping for the EU to concede more in talks. Prime Minister Theresa May met with France’s Emmanuel Macron yesterday, who maintained a position of welcoming the U.K.’s hopes for some single market access, but with conditions to monitor the movement of people and compliance in a realistic manner.

 

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