The U.S. Dollar improved once again this week based on positive global market sentiment and the passing of a two-week agreement that avoids a government shutdown. The outlook of congressional consensus on a spending bill remains a concern, but investors welcomed the relief. Per the Bloomberg Dollar Spot Index, the “buck” has gained for a fifth consecutive day, its best appreciating streak since March.
Non-Farm Payroll figures revealed an expansion of 228K jobs, exceeding expectations of 195K. Nevertheless, the overall bag of data this morning came in mixed as Average Hourly Earnings managed to grow by just 0.2% instead of the estimated 0.3%. Wage growth is imperative for an optimistic economic outlook and revised October numbers surprised with a contraction. Unemployment stayed put at 4.1%. The greenback is seesawing as markets react.
The Euro is trading in lower ranges as good news overnight for the U.S. hurt the shared currency. Equity markets rallying also diminished the Euro’s role as a safe-haven.
Additionally, Industrial Production numbers in Germany came in much lower than predicted with 0.9% growth when economists calculated 1.4%. It is likely the currency will stay quite sensitive to changes in other regions with data already a negative factor leading towards depreciation last seen in over two weeks.
The Pound saw a lot of up-then-down action overnight with a Brexit breakthrough which now points to advancements in the historic negotiations. Prime Minister Theresa May achieved a deal with European Union officials that puts to rest concerns over an Irish border, a final bill, and the protection of rights of EU citizens within Britain. Basically, the PM decided the best route to end deadlock in talks was to follow a path towards a very soft Brexit.
“Leave” campaign political heads seemed highly dissatisfied while stock markets flourished. It seems like the domestic political instability remains a downside risk for Sterling as well as the unknowns regarding a future with less access to European markets. Progress in talks originally boosted GBP, but the doubts and uncertainties that cloud the situation prevented further gains.