The U.S. Dollar is trading in mostly flat ranges with the exception of its steep decline against a resurging British Pound. Developments that will help reignite Brexit negotiations are the driver behind the strengthening. It seems like our negative forecast for Pound will be challenged dramatically in the last month of the year, but risks remain.
Data in the U.S. fell in line with expectation as Personal Spending rose 0.3% while Personal Income and Core Personal Consumer Expenditures ticked higher. The economic indicators are further evidence that the economy can withstand higher borrowing costs, as planned by the Federal Reserve. Advancement in tax reform legislation could impact the dollar as we close the week.
The Euro stayed afloat regardless of a mixed slew of data that saw German Retail Sales contract dramatically. Sales fell by (-1.4%) in comparison to a year ago while being estimated to grow by 2.8%. Talk about missing the mark.
Meanwhile, inflationary growth was not where predicted coming in at 1.5% as CPI for the Euro-bloc. The expectation was 1.6%, already below the desired 2.0% goal the European central Bank has as a target. Perhaps this will lead to the shared currency staying in familiar ranges for the next few months as traders also price-in the long wait for higher interest rates in the continent.
Sterling gained close to 1.0% of ground as a result of sudden improvement in the outlook for Brexit proceedings achieving a potential deal. On the issue of a final bill, the UK is apparently ready to compromise and pay out between GBP 45-55 billion, and taking care of other legal matters.
Secondly, on the matter of an Irish border, there are reports that an agreement could be reached in the next few days. All in all, the EU could be said to be impressed by the fast progress, but a deadline remains in the horizon and businesses feel it may be too soon without much yet accomplished as far as trade is concerned.