Dollar touches a one-month high as euro pullback continues

The single currency suffered throughout much of yesterday and remains on the backfoot against the greenback this morning. EURUSD is below 1.18 and GBPEUR above 1.14 with traders blaming a speech by Mario Draghi yesterday for the weakness in the single currency. In front of the European Parliament President Draghi said “we still see some uncertainties with respect to the medium-term inflation outlook. With this in mind, we will decide later this year on a re-calibration of our instruments that maintains the degree of monetary support that the euro-area economy still needs to complete its transition to a new balanced growth trajectory characterized by sustained conditions of price stability.” He added that “a very substantial degree of monetary accommodation is still needed for the upward inflation path to materialize.”

So far so similar to the most recent ECB meeting but it was enough to drag the single currency lower. That, and the expectations of possible delays to the coalition-building process in Germany have not helped matters.

Declaration of war?

Some of the dollar’s strength dissipated slightly during the Asian session as the temperature on the Korean peninsula increased by a few degrees. Following comments made by President Trump over the weekend, North Korea’s Foreign Minister told reporters that the US President’s words amounted to a ‘declaration of war’ and that North Korea had every right to “take countermeasures” – including shooting down American spy planes.

The North Korean administration like to play up symbolism and October 10th is the next major holiday for the country, marking the foundation of the Worker’s Party. Most North Korean parties tend to have firework displays and the continued threat will not help those looking for a drive higher in the USD. Fortunately, the White House has taken some of the sting out of the USD by confirming that they had not declared war on North Korea.

Not there yet

Donald Tusk, the EU Council’s President, appeared very dissatisfied with the ongoing Brexit talks this morning as he stated that not enough progress has been made to move onto the trade talks that the UK are (somewhat desperately) seeking. While Theresa May’s speech in Florence last Friday may have moved the needle for the UK press, that’s certainly not the case in Brussels, where firmer commitments to an exit fee, citizen’s rights and a regulatory transition period will need to be made before the more important trade-related stuff is decided. It hasn’t knocked sterling yet, but if the EU don’t change their tune sometime soon, the UK’s looking at a greater and greater delay to getting the trade deal with Brussels it so clearly needs.

This morning sees new home sales data, manufacturing numbers from the Richmond Fed and a speech from the Fed chair Janet Yellen at lunchtime.

Have a great day.