Brexit talks and poor data keeping U.S. Dollar afloat this week
The U.S. Dollar sustained most of its
gains overnight and is looking to perhaps improve this morning based on solid
economic data that once more signals inflation growing and consumption being
steady. The Bloomberg Dollar Spot Index grew by 1.0% thus far this week, but
the “buck” may be under pressure. Investigations over Russian ties to
President Trump have taken a turn since last night when former U.S. National
Security Adviser Mike Flynn said that he’d be willing to speak to interested
authorities if promised immunity in the case. Political meddling between
nations is a serious matter and that may keep the U.S. Dollar subdued.
Personal Income and Spending data this
morning showed consistency as expected. Inflationary growth continues to
rise as Personal Economic Expenditures grew 1.8% over the expected 1.7%
estimate while also being revised upward from the prior month. Other Fed
members will speak today, but we’ll keep close eyes mostly on headlines over
Brexit negotiations, which might get ugly quick and the potential for scandal
in the world’s highest office.
The Pound fell this morning based on underwhelming data revealing
that fourth quarter GDP in 2016 negatively affected consumer spending as
inflation rose quickly.
Trade as a result of a weakened Pound benefitted, but this means only the
bigger players in the economy saw growth. Although prices may be on the rise
for some products, they are falling where it matters most.
Housing prices in the UK fell for the
first time in two years, a worrisome figure considering that the housing and
property industry suffered the most after the Brexit referendum. In terms of
Brexit talks, the European Union now looks committed to holding a united front
against any UK perks, saying that Britain will not decide its fate when it
comes to how the full separation will take place. Friction is in the air,
certainly not love.
The Euro fell 1.8% this week, based on European Central Bank dovish
commentary and now deflationary pressures. The Euro-zone’s inflation slowed to 1.5% last
month, way below expectations of 1.8%, a figure closer to the desired 2.0%
target set by the ECB. Although the political risk of France going rightist is
fading according to polls that show Emmanuel Macron, the
pro-further-globalization candidate, could win with a comfortable margin, there
are growing doubts over Brexit talks and the future of the EU.
The Portuguese government is saying that
Brexit shows the EU needs to be reformed, echoing the sentiment of other
troubled nations that feel squeezed by austerity measures placed on them to
prevent defaulting on debt. The struggles
are very real with an economic recovery that may need further help from the ECB
next year and political uncertainty across the continent. EUR could have room
for losses in the next week, maybe beyond.