Daily Market Update

U.S. Dollar Fragile as Shutdown Overshadows Economic Gains

January 22, 2018

The U.S. Dollar weakened up with news of a government shutdown characterizing the weekend.

USD

Congress failed to reach an agreement as talks went late into Friday night with no consensus. Both parties are blaming each other for the lack of progress. Meanwhile, a political breakthrough in Germany helped ease concerns over instability in the EU’s largest economy.

The negative impact on the dollar has been measured in comparison to what many traders expected in case of a shutdown. It is possible a temporary funding bill will be worked on today. A busy week will be accompanied with data in terms of Purchasing Managers Index on Wednesday and Durable Goods Orders on Friday.

 

EUR

The Euro picked up steam once again on developments in German politics. It seems like Angela Merkel will not need to call for a second round of general elections as her ally, the Social Democrats, voted over the weekend to enter formal coalition-building with Merkel’s Christian Democrats. The news certainly help turn focus on the European Central Bank’s meeting on Thursday, where traders will watch for any hint that officials are looking to tighten policy earlier than September, when their monthly sovereign bond purchases are meant to come to a full end.

 

GBP

The Pound is climbing based on the recent positive feedback from some EU leaders about progress in commercial trade talks with Britain. Although some economic measures have started to show weakening and there are talks about the value of shooting for a second Brexit referendum in the U.K., the fact that EU officials are saying they want Britain as a partner is holding Sterling afloat.

Even France’s Emmanuel Macron spoke over the weekend about the importance of making sure a deal is indeed worked out with a transition for businesses. Prime Minister Theresa May faces tremendous scrutiny at home, but other leaders are trying to make things easier.

 

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