Markets Await Deal or Commitment to Less Tariffs

By Amy Chin, Executive Director, Tempus FX

The U.S. Dollar remained in tight ranges over the long weekend here in America as global markets are in dull wait-to-see mode. With earnings already reported and central bank action coming with no major changes, all eyes will be focused on trade headlines and any change in tension in places like Hong Kong and London with a lot at stake. Without definite details, expect quiet with reaction to any developments.

There will be data to chew in the next few days as we get inflation releases in the form of Consumer Price Index (CPI) tomorrow and Producer Price Index (PPI) on Thursday. Early in the morning we did get a reading of the National Federation of Independent Businesses survey in October which revealed more optimism about the economy than expected. We shall see if Retail Sales and Industrial Production make a difference for dollar flows on Friday.

The Euro is trading in rather familiar ranges ahead of a heavy week of data that shall clear up if indeed there is chance for economic recovery in the fourth quarter. Industrial Production tomorrow is expected to contract, as it has all year, thus an expansion could help the shared currency get back to levels seen prior to the start of November when there was more faith in the bloc’s progress. Additionally, improvement to trade with a signed agreement or anything similar shall contribute further. A measly 0.2% is expected as the Gross Domestic Product growth pace for Q3 and we think the continent will meet it if not beat it.

The Pound Sterling returned to strength yesterday as some political news hit the wire while we rested on our side of the Atlantic. Nigel Farage, one of the main architects of the Brexit campaign and now of the political party bearing the name, promised not to contest Conservative Tory seats that could diminish the chances of a conservative majority in Parliament.

The path to elections on December 12th promise to be tumultuous for the country as businesses look to prepare for the long-term since a new administration may not guarantee a deal or resolution right away. Basic Wage Growth slowed down in the third quarter ahead of what could be drastic changes to employment post-elections.

Compliments of Tempus FX, a Member of the EACCNY