U.S. Dollar weak on unresolved shutdown and trade talks

The U.S. Dollar is trading in weaker ranges as yesterday’s session witnessed a change in sentiment over the Fed’s rate outlook as well as ongoing uncertainty regarding the worrisome government shutdown.

Overview

Recent attempts at putting out this fire have failed to work and now rumors from all sides are hurting chances of compromise. Lack of detail on trade is also putting downward pressure on the currency since nothing has emerged about the conversations with China. Some faith in the buck has been lost and due to too many variables without clear solution.

While stocks seem to welcome the idea of looser monetary policy, the greenback is conceding ground since the risk-appetite is helping in the recovery of others across the currency spectrum. Wholesale and Inventories Data for today will not be released because of the government shutdown. Nevertheless, we will have chance for meaningful headlines that could impact the dollar as Richmond Fed President Thomas Barkin, Fed Chairman Jerome Powell, St. Louis Fed President James Bullard, Chicago Fed President Charles Evans, Minneapolis Fed President Neel Kashkari and Fed Vice Chairman Richard Clarida all are scheduled to speak today in that order.

What to Watch Today...

  • • No major events scheduled for today.

EUR

The Euro surged to its highest level against the buck since October, regardless of worse-than-anticipated data out of the region’s most imperative economies. French Consumer Confidence as well as Industrial Production was down, while in Germany both exports and imports also were worse than expected.

On one more positive note for the EU as a whole, the European Central Bank minutes from the last meeting revealed that there are indeed concerns about a slowdown in economic momentum and cheap loans are being considered to foster lending and investment. The outlook, per the notes, is “fragile and fluid.” We are on the side of Euro revival; thus far we are getting it.

GBP

The Pound is quiet, but turmoil may be ahead as we get confirmation of the defeat of Prime Minister Theresa May’s Brexit deal. A vote yesterday on amendments to it failed the House of Commons, only ahead of the inevitable death of the whole thing scheduled for Tuesday January 15th.

We see plenty of swings coming, but an eventual solution to anything Brexit deal-wise could cause a spike. Historically, Sterling has not only been resilient, but quick to appreciate on favorable news, thus explaining our Pound “semi-optimism,” if we have to call it anything.