Dollar pushing back
After a few days of drama last week, the greenback is kicking off this week on a slightly stronger note.
Over the weekend, U.S. debt yields rose causing the dollar to lift against the euro, pound and yen. However, the dollar-buying due to the higher Treasury 10-year yields doesn’t seem to be enough to propel the weak dollar too far, even when other currencies are facing their own challenges.
Upcoming this week is the Federal Reserve’s meeting on Wednesday. No policy change on interest rates is expected, but it is the last meeting for Janet Yellen before Jerome Powell takes over as chairman. President Trump is also set to give his first State of the Union address Tuesday night.
Payroll numbers and unemployment data will be released Friday, making for another big day of economic data before the weekend.
Pound pressured by politics
The pound is trading down against the U.S. dollar as pressure builds on Prime Minister Theresa May and the country’s Brexit plan.
Over the weekend, members from May’s Conservative Party demanded she show more conviction for separating from the European Union after talk of a softer Brexit from Chancellor of the Exchequer Philip Hammond.
The pound could spike or fall again as the House of Lords is set to begin this week discussing the country’s transition away from the EU. The actions by the Lords will determine if the country will have a smooth divorce or if the Brexit plan could even face a second country vote. The Labour Party has already stated it plans to support 20 amendments to the withdrawal bill.
Further inspection of the U.K.’s Q4 GDP results announced Friday is also lowering the GBP/USD pair around the 1.40 midpoint. Although results beat estimates and lifted cable, WorldFirst’s Chief Economist Jeremy Cook says the overall economic picture (and the dependence on the services sector) means the U.K. is missing opportunities for growth. The U.K.’s growth is crawling while the rest of the world is walking, or even skipping ahead.
USD/JPY flat ahead of retail numbers
The Japanese yen weakened as the Bank of Japan downplayed Governor Haruhiko Kuroda’s comments regarding stronger inflation. The USD/JPY pair is trading relatively flat just below the 109 mark. Japanese retail numbers and unemployment data for December are set to be released overnight, so we’ll see how that impacts the pair tomorrow.