October 17 2018

Oct. 17, 2018 (Western Union Business Solutions) – The U.S. dollar was the lead currency Wednesday with the stakes and tensions running high in Europe as another Brexit summit got underway. Nearly across the board gains buoyed the buck against the euro, sterling and Canadian dollar. The dollar also appreciated against the Aussie and kiwi dollars and emerging markets. However, U.S. stock futures pointing to a negative open after yesterday’s robust gains whet some appetite for the safer yen. While stronger, the dollar was confined to a horizontal range with its upside capped by mixed data. The buck’s fate today is seen hanging on the tone of the minutes from the last Fed meeting at which officials raised borrowing rates for the third time this year. Minutes suggesting solid conviction in the central bank pushing rates higher later this quarter and further over the coming year would tend to be dollar-positive.




The euro fell toward the bottom of a tight range as it largely shadowed sterling lower against the greenback. While the euro has shown a flare for acrobatics of late, having hit two-week highs this week, Italy’s precarious budget situation has fastened a lid on it. Euro zone inflation confirmed that prices grew by 2.1% annually in September but the more important core rate was a full percentage point lower at 1.1%, a decidedly benign level that keeps an ECB rate hike on a far, second half of 2019 horizon.




Canada’s dollar retreated from its highest in nearly two weeks as oil prices dipped, and the greenback enjoyed broad based gains. Market sentiment also turned cautious with Wall Street pointing to a negative open after yesterday’s massive gains. Oil prices were down nearly a percent to below $71.30. Downside for the loonie is likely to prove limited with the Bank of Canada expected to raise borrowing rates in a week.




Sterling wilted as another high stakes Brexit summit got underway between Britain and the EU. The Brexit parties remain at loggerheads over agreement on their divorce terms which is keeping alive the risk of a disorderly, no-deal outcome that is considered bearish for the pound. Sterling should serve as a barometer in today’s talks with declines signaling a greater risk of a messy outcome and a rise pointing to progress on a treaty. Sterling also suffered after U.K. inflation moderated more than expected to an annual rate of 2.4% in September, a marked slowdown from 2.7% in August. Core inflation slowed below the Bank of England’s 2% goal.