The U.S. Dollar is trading in mostly familiar ranges as this week has closed with major developments that could dictate the mood short-term for markets.
Overview
Overnight, American and other allied forces launches military strikes against Houthi rebels in Yemen who have been plaguing the shipping lines lately.
The Mideast chaos seems to have taken another step yet in its escalation as now foreign powers are determined to make sure their interests are those of free-flowing markets are protected in the midst of conflict. For now, it is not pulling the dollar heavily one way or the other and there is mixed reaction all across the board and through other exchanges.
Data-wise, inflation in the U.S. is wanting to confuse us with suppliers looking to have gotten a break after it was revealed through CPI yesterday that consumers are not. Producer Price Index numbers from December showed an unexpected contractions coming in at (-0.1%) when a rise was estimated. This means that in general price levels are under control and that if suppliers are not seeing costs higher, in fact deflating, this will translate into little price-pressure going forward for all. As world affairs get heated, banks are apparently being negatively impacted as low earnings credited as having been challenged by the uncertainty in foreign relations.
What to Watch Today…
EUR ⇑
The Euro held steady with minor swings throughout this week as most of the focus was on the problems around trade in the Suez Canal. After we return from holiday next week, mid-January should feel as more a full return to activity all around financial markets. We will likely see more of a reaction as data paints us a picture for how the year closed for the region. We get Industrial Production as well as Consumer Price Index accompanied by inflationary expectations from the European Central Bank.
GBP ⇓
The Pound has behaved similarly to Euro this week, limited in its action as the world gets 2024 gears actually grinding. Indicators did come out this morning for Gross Domestic Product and Industrial Production showing once again that progress in expanding has been a struggle. The November monthly figure came out at 0.3% vs. 0.2% forecast, but the 3-month average suffered after October was revised to have been a (-0.3%) contraction. The same happened with Industrial Production, which rose 0.3% in November, but revised collapsed (-1.3%) in October. We shall see how the Bank of England responds to questions about the fragile nature of the economy and plans not to stimulate it in the first 6 months of the year.
