Daily Market Update

GDP Growth Boosts Euro; Terrible January for U.S. Dollar

January 30, 2018

The U.S. Dollar is trading in weaker ranges, returning to its negative trend as seen thus far this year.

USD

January was a tough month for the greenback, down by almost 4.0% overall against its main ten counterparts as measured by the Bloomberg Dollar Spot Index. Political distractions over budget talks, immigration, and other investigations have overshadowed economic data and the interest rate outlook.

Per the Fed, they are ready to hike as soon as March based on solid economic advancement. Nevertheless, it is hard to find any factor that is able to propel the dollar as it continues to recover from dovish statements rooting for its weakening. The Davos Forum also affected the perception over the U.S.’s trade approach, which is shaky and also contributes to the dwindling of the most common currency.

We shall see if any data points make a dent in negative fluctuations. Consumer Sentiment is out at 10AM today, while ADP Employment Report comes out tomorrow as a preamble to the official employment Situation on Friday. Of course, any new instability in wages or the labor market will sink the buck further.

 

EUR

The Euro rose once more by almost half a percent, based on its economic consistency that supports eventual tightening. Gross Domestic Product growth for Q4 came in at 0.6%, improving the annual average to 2.7%.

It is hard to see down the line what could slow the Euro’s momentum other than dovish commentary from the European Central Bank officials who feel they do not want to push the shared currency higher. Although German inflationary growth slowed down a bit, it would not be a surprise if the lack of price growth is used as an indicator that suggests nothing in terms of QE should be changed until September. We believe current three-year best levels are here to stay.

 

GBP

Sterling continues to defy the constant bad news relating to Brexit and the effects of abandoning the EU’s single market. A memo was apparently leaked in which the U.K. government reveals its negative forecasts for economic growth once the U.K. leaves.

The figures are not positive, with one of the main highlights being that the British economy would stand to lose 8.0% of its value in the next 15 years, a devastating blow that makes Brexit look like a deplorable idea.

As we mentioned on our yearly outlook, other reports, which infuriate pro-Leavers, mention that wages will fall by half a percent for workers in the next few years. Per the memo, every scenario, “Hard Brexit” or not, is a terrible thing for the U.K. Somehow, the currency is immune to all of this. It is the most resilient currency in the world.

 

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