The Dollar edged lower to a five-session low today despite the release of data showing a rebound in the US housing market in November after a few weak months. US Building permits and housing starts were up 5% mom and 3.2% in November.
Markets are seemingly focused on tomorrow’s Federal Reserve policy meeting (at which the Fed is likely to hike rates 25bp) and the risk that FOMC members will significantly cut back their expectations for rate hikes in 2019 (from about 70bp based on the September 2018 “dot-chart”). As a result, the Euro and Sterling were able to edge out small gains against the Dollar, despite the release today of weak German IFO data and ongoing Brexit-rumblings. The German IFO business climate index fell to a 21-month low of 101.0 in December, taking the Q4 average below 102. This suggests that German GDP growth, which contracted 0.2% qoq in Q3, remained weak in Q4. The NZD/USD cross, which has whipped around in recent sessions, is up a healthy 0.7%
