Dollar on the front foot

The dollar was on the front foot at the start of the week, strengthening to under $1.13 against the euro and to under $1.29 against sterling, as well as rising to over Y110 against the Japanese yen. Elsewhere, the pound is once again largely unchanged against the single currency trading at just over 87.5p

Ironically enough, the dollar has actually gained ground since the Fed changed tack on its monetary policy stance at its end-January meeting, when it effectively indicated the next move in interest rates could be up or down. A number of things can be said about the dollar’s resilience. Firstly, in an environment of softening global growth, it appears the US economy is holding up the best of the largest economies. Secondly, if the  more uncertain economic outlook has implications for the Fed’s monetary policy stance, then it has implications for other central banks’ policy as well. And thirdly, US 10-year yields have risen relative to, say, equivalent German and UK yields since the end of last month (albeit modestly so), which is also providing some support to the dollar

GDP growth in the UK economy slowed in the final quarter of 2018, to 0.2% (quarter-on-quarter) from 0.6% in Q3. A notable drag on growth was business investment, which fell for a 4th consecutive in Q4 to end the year down almost 4% from the end of 2017. This, perhaps, the clearest manifestation of the impact of Brexit uncertainty, which as we know has continued into the opening weeks of 2019

Prime Minister May will make a statement in Parliament today updating MPs on her recent discussions with Brussels on a way forward. This will form the basis for a motion to be put before the House to be debated and voted upon on Thursday

It seems a tentative deal has been agreed by Congressional negotiators to avoid another US Government shutdown, with a vote expected to take place towards the end of this week

It is quiet on the data front today with US job openings the only release of note