U.S. Dollar softening as trade and shutdown woes continue

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The U.S. Dollar is trading in mostly weak ranges this morning, shedding away gains from an earlier appreciation at the very start of the year.

Overview

The safe-haven status that lifted the buck while stocks plummeted has faded and thus the gains against all counterparts. A meeting in Atlanta on Friday produced negative dollar headlines as it looked like Fed Chairman Jerome Powell appeared dovish when asked about falling stocks. The head of the central bank replied by saying that the Fed heard market fears.

Additionally, oil prices picked up some momentum that helped commodity-based currencies, as the nations holding them await a resolution to the U.S.-China trade conflict that can spur risk-appetite.

Factory Orders and the Institute of Supply Management’s Non-manufacturing Index will be key indicators to be released today at 10AM. Any news on the spending bill impasse in Congress will certainly affect market sentiment and we shall monitor if it pushes the dollar significantly one way or the other.

What to Watch Today…

  • • Factory Orders 10AM

    • ISM non-Mfg. Index 10AM

EUR

The Euro felt the impact of revived equity markets and renewed doubt over the Fed’s outlook for the year. Since the wild swings of last week and the current U.S. government shutdown, the shared currency has benefited from a comparative perspective as it looks like the global economy could use a break on such a strong greenback.

Uncertain times remain with registered slowdowns in Purchasing Managers Indexes and low inflationary growth, which could be mostly accredited to reduced oil/energy prices recently. The shared currency will only start creeping up further if we do not solve some struggles on our side of the Atlantic.

GBP

The Pound has seen its up and downs since the beginning of December, but has managed to show its historic resilience by recovering it all, finding itself in the exact level since then. Today Parliamentary activity returns and with it likely worsening news on the Brexit deal front.

A vote is due for January 14th to determine if indeed the deal by Prime Minister Theresa May has any chance of passing and if her tenure could be over. We see an eventual quick solution that could initially strengthen Pound, but this unprecedented process could develop any kind of issues. The U.K. economy is surviving thus far, thus why we see potential for Sterling to climb if something Brexit-wise improves somehow.

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