All the focus has been on Brexit in the past 48 hours but Sterling today found its footing, with Prime Minister May having seemingly secured her position at least for now. A further tick-down in the Dollar admittedly helped both Sterling and the Euro, with the Dollar trade-weighted index at an 8-session low.
The Dollar has been particularly volatile in the past three weeks and lacking any obvious direction. Weaker-than-expected US macro data for October-November have arguably played their part. US retail sales growth rebounded to 0.8% mom in October but the core measure was disappointing, while industrial output growth was a meagre 0.1% mom. But the biggest miss was the larger-than-expected fall in the Philadelphia Fed manufacturing index to 12.9 in November from 22.2 in October. Indications so far are than US GDP growth may have slowed further in early Q4 from 3.5% qoq annualised in Q3 and this may have underpinned Fed Chairperson Powell’s somewhat less bullish rhetoric in his speech yesterday.
This dip in the Dollar helped mask ECB President Draghi’s words of caution in a speech today in which he flagged the growing risks to Eurozone GDP growth and inflation. The EUR/USD cross managed to creep up above 1.14 for the first time since early November with the Euro TWI edging to a 14-session high. The Euro is frequently written off but ultimately remains one of the steadier, major currencies with ECB guidance seemingly taking the edges off the common currency.
