Monex: Dollar koerst licht hoger na voorgestelde belastingverlaging in aanloop naar verkiezingen

22 januari 2020

Hieronder volgt een commentaar in het Engels van Ranko Berich, Head of Research bij Monex Europe op de koersbewegingen van de euro, het Britse pond en de Amerikaanse dollar.

USD

The dollar generally trader higher amid a risk-off tone and falls in crude oil prices that weighed on NOK, AUD, NZD and CAD, as well as most EM currencies. US news flow offered plenty of engaging side plots yesterday, such as the doomed attempt to impeach Donald Trump in the US Senate, or the hacking of Jeff Bezoz’s phone by the crown prince of Saudi Arabia. The impeachment trial, while arguably significant - or even momentous - in a constitutional context, is likely to remain insignificant from the perspective of financial markets given its vanishingly low odds of success. The only exception to this would be if further politically damaging evidence came to light and seemed likely to affect the upcoming US elections. Elsewhere, Treasury Secretary Steve Mnuchin told the Wall Street Journal that the administration’s upcoming budget proposal will include a middle class tax cut, although the administration is unlikely to receive support from the Democrat-controlled House for a debt-fuelled election year giveaway. Mnuchin also warned that Italy and Britain would face tariffs if they implemented digital taxes.

EUR

EURUSD spent much of the day trading higher yesterday until broad dollar strength pushed the pair back into the red. Economic data from Germany in the form of the ZEW survey of business expectations provided the positive surprise for euro strength with the current situations index rising from -19.9 in December to -9.5 with the expectations index rising from 10.7 to 26.7 in the same time period. While the data suggests business owners are still negative on the current outlook of the German economy, the data point confirmed that this negativity may begin to bottom out as the index continues to rise towards the 0 breakeven level. With the ECB set to release fresh guidance on monetary policy tomorrow, options markets expect EURUSD to remain range-bound. One-day volatility prior to the event stands at half the amount seen prior to Christine Lagarde’s first monetary policy meeting back on December 11th, while the skew of implied volatility suggests options markets expect mild euro strength after the meeting.

GBP

Sterling traded higher yesterday, as firm labour market data for November was seen as introducing some doubt to market expectations of a rate cut from the Bank of England at next week’s meeting. Average Weekly Earnings rose 3.2% in the three months ended November, compared to the same period a year ago. The Unemployment Rate remained at 3.8%, while net employment rose 208,000 over those three months, 100,000 more than the median estimate on Bloomberg. The figures further complicated a UK data picture that was already murky. Last week saw expectations of rate cuts from the Bank of England soar after a weak GDP print, poor retail sales, and dovish comments from MPC members. Yesterday’s figures offered at least some support to the argument against a near term rate cut, although labour market data is even more lagged than GDP and retail sales.