November 12 2018

Nov. 12, 2018 (Western Union Business Solutions)  – The US Dollar continues to gain strength against its major currency rivals after the US Federal Reserve (Fed) reaffirmed the need to raise interest rates at a gradual pace last week. The expectations of a rate hike in December lifted and the monetary policy divergence between Europe and America widened, allowing the dollar to appreciate. Demand for the dollar continues to swell as the US Dollar index, which tracks the value of the dollar against a basket of currencies, climbs to new 16-month highs around 97.50 this morning.  Data from America this week includes inflation data on Wednesday, retail sales on Thursday and industrial production on Friday.




The Euro has fallen to a fresh 16-month low against the US Dollar this morning, tumbling as investors increase demand for dollars in the current uncertain climate in Europe. As well as sterling, the euro is also suffering amid the rising risks of a no-deal Brexit. The standoff between Rome and Brussels over Italy’s controversial new budget plan is also weighing on the common currency. Tensions and risks are rising as the European Union gave Italy until Tuesday to present a revised version of the budget.  The data docket is quiet across the board today, but tomorrow’s German inflation figures and ZEW survey will kick start another busy data week from Europe. On Wednesday, flash German GDP data will be revealed alongside the Eurozone’s industrial production figures and the blocs overall GDP number. The week will wrap up with a raft of inflation data, but most notably the overall Eurozone core inflation number is forecast to remain well below the European Central Bank’s target of near 2%, which could add to the Euro’s woes.




Renewed Brexit uncertainties continue to plague the British Pound this morning. A Reuters report over the weekend revealed that Moody’s rating agency has warned that the risk of a no-deal Brexit has risen sharply. It appears that UK Prime Minister Theresa May has been forced to abandon plans for a special cabinet meeting to approve a Brexit deal this week and a number of British ministers are threatening to quit again, ramping up the pressure on Ms May and weakening sterling as a result.  This week, investors will also be eying the important UK economic data released from Tuesday onwards. Tomorrow, UK average earnings and unemployment data could give the pound some support as wage growth is forecast to remain above 3%. UK inflation data will be released on Wednesday with a small uptick expected, which could offer sterling additional support. Retail sales data will be revealed on Thursday.