Daily Update - 28th November 2017
The US Dollar looked under pressure falling to fresh multi weeks lows against Euro and Sterling on Monday morning but managed to recover strongly after the US housing data reassured traders that the Fed will keep hiking rates not only in December but also a few more times in 2018. The US dollar started the week on the back foot, extending some of the losses it suffered from last week. Yet with the highest level of new home sales in a decade, the greenback did not remain unfazed. A leap to 685K annualized sales of new units in October certainly beat expectations of only 627K. Economic growth and expansion in the housing sector go hand in hand. Every sale of a new home has a wider impact than a sale of an existing, second-hand home It’s another relatively quiet day on the data front for the Eurozone, with stats limited to this afternoon’s GfK consumer climate figures for December. It’s not clear whether the survey will have covered the period following the break down in coalition talks to provide the markets with some idea of whether there is likely to be any economic fallout from Merkel’s troubles. For now, the EUR has managed to strand its ground on hopes of a grand coalition, but we can expect some uncertainty to creep into the EUR as the year-end draws near, the markets certainly looking for Germany to resolve its political issues sooner rather than later. For the UK, the BoE’s financial stability report is scheduled for release this morning, which could weigh on the Pound should the report raise material concerns over financial stability. Thrown into the mix will be the BoE’s release of the bank stress test results, with Carney discussing the results and presenting recommendations following the release. Again, any concerns over the banking sector would be a negative for the Pound, while the pendulum could swing the other way if the stress tests delivers no surprises this morning. Across the Pond, macroeconomic data out of the U.S includes October’s goods trade data and November consumer confidence figures that will provide some direction for the Dollar, though by the close it will come down to progress on tax reforms, the incoming FED Chair Powell’s session in the House and speeches delivered by voting FOMC members Dudley and Harker, both of whom have been on the hawkish side of late. For the outlook on rates, the interest is now on the projected rate path for next year, rather than a rate hike in December, which has been priced in. Any hawkish commentary on rates for next year will be Dollar positive, though the markets will also need to be convinced that tax reform bill discussions are making progress.Yesterday’s Focus
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