Political uncertainty hurting the dollar

The dollar started the day yesterday down against most currencies, most notably losing a cent in one hour against the pound. A lot of this was down to a lack of action in Washington with President Trump claiming a government shutdown could happen, and a breakdown in talks on immigration between the Republicans and Democrats.

The afternoon session was a completely different story with the market’s focus shifting back to talk of interest rates in the US. In Dallas Federal Reserve President Robert Kaplan’s speech, he indicated that he expects at least three rate hikes from the Fed this year. His views were mainly attributed to the recent fiscal stimulus in the form of tax cuts and his prediction that “the economy is going to be strong this year”. This sentiment was echoed by Chicago Fed President Charles Evans, who expects “stronger business investment this year, boosting growth sustainably over next couple of years”.

Earlier this morning, the data from the US was mixed with initial jobless claims dropping to their lowest level since 1973 but housing starts dropped more than expected on less construction of single-family homes.

ECB meeting on the horizon

Benoit Coeure, the man in charge of the European Central Bank’s asset-buying program, is speaking today. Analysts will be watching his words closely to see if they can glean any information at all in regards to how the European Central Bank meeting will go later this month.

Interest rate hike lost in NAFTA noise

The Bank of Canada raised rates to 1.25% yesterday, but the Canadian dollar is one of very few currencies to have lost ground against the greenback. The Loonie’s weakness is down due to Trump’s threat of terminating the US’s involvement in the NAFTA agreement.

Australian dollar boosted by jobs figures

Australian unemployment unexpectedly rose in December from 5.4% to 5.5% according to numbers released yesterday evening. This caused the Australian dollar to weaken half a cent but recovered quickly as traders digested the news that 34,700 new jobs were created in December against the consensus of 13,200. It is now trading close to 0.80.

Alex Fitzpatrick, The WorldFirst Team