Domestic issues anchoring the USD

While volumes were quiet and markets thin over Veteran’s Day on Friday, markets were still busy as Trump concluded his Asia tour and we saw some tier 1 economic releases. The University of Michigan’s consumer confidence index fell to 97.8 in November against an expectation of 100.8. The current conditions score fell to 113.6 from 116.5 and expectations decreased to 87.6 from 90.5. The report noted that “an improving labor market was spontaneously mentioned by a record number of consumers in early November, and anticipated wage gains recorded their highest two-month level in a decade. These favorable trends were countered by a slight rise in year ahead inflation expectations and a growing consensus that interest rates will increase during the year ahead”.

Perhaps more importantly, tax reform progress news is thin on the ground, but a vote in the House on the bill is expected to take place on Thursday. According to Politico the weekend’s work whipping and demanding Republican lawmakers to give the bill their thumbs up was easier than expected, which could mean Paul Ryan and his staff are confident that they’ll have enough votes at the end of week to pass the legislation. But, there will still be further hurdles to tackle before the dollar meaningfully begins to price in tax cuts anytime soon.

Sterling stung

GBPUSD is already lower by around 0.75% lower this week following front page coverage of a letter carrying 40 Conservative MPs signatures to express their lack of confidence in the UK Prime Minister.

Alongside the resignation of International Development Secretary Priti Patel, the continual calls for the Foreign Secretary Boris Johnson to resign, the ongoing harassment scandal and the continual lack of Brexit progress sterling has become a political currency once again. All of the meat afforded to sterling by the initial suspicion and expectation of a Bank of England interest rate hike has now been lost and these losses are now cutting into the bone.

With the Budget only 10 days away the focus for sterling will remain on Westminster even as the economic calendar heats up over the course of the week. The Great Repeal Bill is due to have its 2nd reading tomorrow in Westminster with further calls for a transitional deal only expected to grow louder and louder.

Calls from EU chief negotiator Michel Barnier for a ‘clarification’ of its numbers and financial obligations were met with an emphatic ‘nope’ from the Brexit Secretary and this is the sticking point that once again could torpedo our ability to begin trade talks in December and limit the ability of businesses to plan how they need to operate in the future.

The day ahead

The calendar is particularly quiet today however we have US and UK inflation data, jobs numbers from the UK and Australia as well as US retail sales and industrial production before Friday.

Have a great day.