Dollar’s gains prove short-lived

The dollar’s gains at the start of this week have proved short-lived (though perhaps just for now) with the US currency trading at around $1.0550 against the euro this morning, or about 2 cents off Tuesday’s high. The move up in EUR/$ has also been accompanied by some strengthening of the single currency against sterling, to over 85.5p

The minutes of the Fed’s December meeting published yesterday evening seem to have contributed to the dollar’s move lower. The minutes noted that there was ‘considerable uncertainty’ about the impact of future economic policy ‘initiatives’ on US growth, which could ‘turn out to be faster or slower’ than the Fed currently anticipates. While the Fed acknowledged that, in relation to fiscal policy specifically, any ‘stimulus’ via tax cuts and/or spending increases might mean interest rates would have to increase more quickly, for now it believes it can continue raising rates at a ‘gradual’ pace

The annual inflation rate in the Euro area jumped up to 1.1% in December (from 0.6% in November), the first time in more than 3 years that it has been above 1%, largely reflecting higher energy and food prices. Core inflation (which strips out the impact of energy/food prices) nudged up to 0.9%

Data due today include the services PMI n the UK and jobless claims in the US