There’s no shortage of market activity this morning. Even though everyone is looking ahead to this afternoon’s expected dovish hike by the Federal Reserve, positive news out of Italy is boosting the euro, the pound is moving due to data instead of Brexit, and U.S. politicians look to play kick the can.
EUR/USD propped up by Italy news
The Euro is being propped up by positive news regarding the E.U.-Italy budget disagreement Wednesday morning.
Italy had lowered its deficit figure from 2.4% GDP to 2.04% earlier this week and as a result the European Commission will not fine the country for going against E.U. rules.
The E.U. isn’t entirely happy with the solution, with Commission Vice President Valdis Dombrovskis calling it “not ideal.”
The EUR/USD pair climbed up from 1.137 to 1.141 this morning on the news. The pair sits around 1.140 ahead of today’s Fed decision at 2 p.m. EST
As widely reported, the Fed is expected to raise rates to 2.5%, but signal a slowdown in increases for 2019. President Trump might have to live with yet another rate hike in 2018, but get his Christmas wish of no hikes starting in 2019.
Shutdown delay floated
Once again this year, Congress might be playing kick the can with funding the government.
Instead of addressing the border battle between President Trump and Democrats before Christmas, a bipartisan group in the Senate is working on stopgap funding to fund the government until Feb. 8.
President Trump is reportedly open to the solution, but tweeted that “One way or the other, we will win on the Wall!” He has apparently given up on his desire to have the wall be concrete, calling it “artistically designed steel slats” in a tweet Tuesday.
Pound falls with inflation
Since the Brexit deal vote is on hold until Jan. 14, there’s more room for other factors to sway the movements of sterling.
The consumer price index for the U.K. in November declined as expected, hitting estimates of 2.3% growth YoY. The core CPI grew 1.8% compared to the 1.9% in October.
The GBP/USD pair dropped from 1.267 to 1.260 Wednesday morning with the data. But Brexit speculation will likely resume its leading role in cable fluctuations soon.
There are now 100 days until the U.K. leaves the E.U. on March 29, with the prospects of a no deal looking more likely and both the U.K. and E.U. taking precautionary measures in case that happens.
Canadian dollar dips with CPI
The USD/CAD pair retreated from 18-month highs of 1.349 this morning as the Fed decision looms, but inflation data out of Canada also briefly pulled the Canadian dollar lower Wednesday.
The consumer price index for November slowed more than expected to 1.7% YoY growth compared to estimates of 1.8% and 2.4% growth the prior month. Headline CPI fell 0.4% as expected.
The USD/CAD pair lowered back to 1.345, stuck in a tight range with the CPI weighing on the Canadian dollar and the pending Fed decision pulling the U.S. dollar lower.