U.S. Dollar Falls Overnight but Looks to Recover After Good Data

USD

The bleeding continued for the U.S. dollar overnight, but the buck is recouping its losses after economic figures this morning showed expansions in Producer Price Index and Retail Sales. PPI year-on-year landed at the expected 1.6%, while Retail Sales expanded less than expected, but November figures were revised upward.

On paper, the U.S. economy looks strong, but the Trump optimism that was driving equity markets and the value of the most traded currency seems to be fading quickly. Other factors may start influencing the dollar, but politics and the tone of rhetoric have been responsible for wild fluctuations thus far in 2017.

On the other hand, Fed Chairwoman Janet Yellen said in a meeting with economists and educators that she sees no serious short-term risks to the U.S. economy. However, she did point out that productivity, imperative to improving living standards in the long term, remains at very low levels historically. Economists are finding it very difficult to explain. Yellen believes a higher share of income increases have gone to those with higher education, thus resulting in rising inequality in America. Wages are a key measure that the Fed has often said needs further improvement.

 

GBP

The Pound remains under pressure despite recently impressive economic indicators. Prime Minister Theresa May is planning to speak on Tuesday about her strategy for Brexit and just in general give us some clue as to what they intend to do. There’s been little to no consensus on how to fully separate or just if it’d be best to throw the whole idea of divorce away.

Parliament will have a say in when to invoke Article 50, but lawmakers have repeatedly asked if it’d be possible to negotiate and maintain economic ties, but no universal immigration policies within the EU. The process has been characterized by a sense of loss and a stubborn feeling of delaying what may be inevitable: a difficult, infuriating, and frustrating “Hard Brexit.” GBP is the third worst performing currency this year after Mexican Peso and the troubled Turkish Lira.

 

EUR

The Euro climbed once more during Asian and European sessions with focus staying on the incoming new U.S. President. Currently, the shared currency is on a winning streak with this being its fourth consecutive week of gains. This is the longest stretch of EUR strengthening since March 2014. The

ECB will meet on January 19 to discuss current stimulus, but likely will not make any moves. Nevertheless, positive statements or any indication of confidence could prove a driver for further EUR advanc