The Dollar has made small gains against most major currencies today, including the Euro and Sterling, but is down against Latin American currencies and as a result is broadly unchanged in trade-weighted terms. FOMC members Clarida, Evans (non-voter), Bostic and George (non-voter) are due to speak later today at a conference in New York and their perspectives on Federal Reserve monetary policy may well see the Dollar come to life. However, Fed Chairperson Powell’s scheduled speech tomorrow is more likely to set the Dollar tone for the remainder of the week, along with a slew of US macro data releases including the second reading for Q3 GDP growth.
As has been the case so many times in recent months, US President Trump and Brexit drove market price action today. Trump last night argued that the Brexit deal was better for the EU than the UK and cast doubts on the UK’s ability to trade with the US once it had left the EU. President Trump’s grasp of Brexit facts is arguably tentative at best – the UK will be able to sign new trade deals with non-EU partners after 29th March 2019 and while these will only come into effect after the end of the transition period (currently pencilled for 31 December 2020) the UK will be able to continue trading with these countries.
Nevertheless, President Trump’s intervention came in the wake of a number of studies showing that the UK would be materially worst off should it leave the EU, particularly without a deal in place, and caused Sterling to weaken 0.5% with the GBP/USD cross falling below 1.275 for the first time since 30th October. Trumps’ comments have put the already embattled Prime Minister May under further pressure to defend the Brexit deal which she recently agreed with the EU. This pressure is unlikely to relent in the run-up to a British parliamentary vote now confirmed for the 11th December, with parliamentarians on both sides of the Brexit divide continuing to voice their discontent with the deal on the table.
