USD Loses Momentum Over Weekend, with Fed Hike Imminent


USD

The U.S. Dollar is weaker from last week as most major peers surged throughout the weekend. Resource-based currencies are recovering as commodities and equity indexes across the globe are up. However, the “buck’s” post-election surge has come to a halt as President-elect Donald Trump continues to consume the headlines with administrative appointments and his unusual behavior with the press.

There is no data scheduled for the rest of the day. Earlier this morning, the Chicago Fed Index showed that the region had a rough two months in terms of economic activity, but the impact is muted. Economic steadiness in the U.S. has already been established. With moves against the greenback only representing a half percent loss, USD remains fluctuating at around multi-month highs reached throughout last week. Chances of a hike on December 14th are at 100.0%.

GBP

The Pound fell most of last week and though the bleeding has stopped, things could get bad in the next few days. Chancellor of the Exchequer, Philip Hammond, is expected to reveal the UK’s budget and have some holes to fill. GDP growth and public finances are likely to be downgraded and a whole lot of borrowing may be in slate. The deficit could widen in the next few years.

With banks finding it hard to make a case to stay and political infighting on the timing of invoking Article 50 to exit the EU, we expect further trouble for GBP as we close the year. Sterling fell by over 1.6% in the last ten days.

EUR

The Euro came back from trading around its worst levels in over a year after a busy weekend in politics. In France, where Presidential elections have started, former head of state Nicolas Sarkozy failed in his bid to regain power. Coming in third, Sarkozy will not be on the ballot for the next round leaving room for former Prime Minister Francois Fillon and far-right candidate Marine Le Pen. 

Meanwhile, Angela Merkel will run for a fourth term as Chancellor in 2017. Populism, nationalism, and a taste for change may direct the Euro downward as we move closer to elections in many member countries where anti-EU sentiment is already growing strong.