Political Risks Stunt Dollar Rally

The U.S. dollar rallied across the board during yesterday’s session despite lackluster data.

USD

The U.S. dollar rallied across the board during yesterday’s session despite lackluster data. The greenback’s momentum was slowed overnight as some attention in Washington shifted from the tax reform bill to the pending debt-ceiling deal, or lack thereof. In September, the debt limit debate was kicked down the line but the current deal expires on Friday. There are reports that a plan is in place for a two-week extension. However, that still means Congress will have to raise the debt ceiling at the same time it is working to pass a massive tax overhaul. Headlines out of Washington will remain highly relevant to the greenback through the end of the year.

This morning’s economic data was unable spark resurgence for the greenback. ADP private payrolls rose 190K in November, right in line wi-th expectations. The print will do little to change expectations for Friday’s Non-farm payrolls which is expected to show the American economy added 195K jobs in November.

 

JPY

Global equity markets are lower and American futures point to a weaker open after news that President Donald Trump is expected to formally declare Jerusalem Israel’s capital. The decision is politically contentious in the region and could spark a wave of unrest, which would boost safe-haven currencies. Palestinian leaders have called for “three days of rage” over the decision that would end on Friday. The Japanese yen has been the overnight beneficiary of the news, gaining nearly half a percent against the U.S. dollar.

 

GBP

In what has been a familiar theme, the British pound is again under pressure due to Brexit uncertainty. After a rough start to the week that saw a possible deal on the Irish border dispute fall through, Prime Minister Theresa May faced more headwinds overnight. The Sun’s newspaper political editor tweeted that a source from the Northern Irish party, which props up May’s government, told him there would be no deal on Brexit this week. She is also facing pressure from those within her Conservative party that do not want a “soft-Brexit” in which U.K. regulations would remains alighted with the EU.