Dollar Hits 10 Day Lows

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Market Drivers December 4, 2018
GBP pops on ECJ ruling
Dollar hits 10-day lows
Nikkei -2.39% Dax 0.78%
Oil $54/bbl
Gold $1240/oz.
Bitcoin $4041

Europe and Asia:
GBP UK PMI 53.4 vs. 52.5
EUR EZ CPI 0.8% vs. 0.5%

North America:
No Data

The dollar index hit a 10 day low as the slide in US yields continued to weigh on the buck in Asian and early European session.

With G-20 behind them, the market started to focus on the Fed and the upcoming meeting and press conference that could provide fresh guidance for the markets in 2019. Over the past few weeks, Fed officials have taken a decidedly less hawkish tone in their approach to rate hikes and markets are now looking for only 2 possible hikes in 2019. The markedly lower expectations have taken their toll on US yields with benchmark 10 year now sliding below the psychologically important 3% mark and that dynamic has weighed on the greenback which was lower across the board today.

In addition to US macro news, the majors were aided by some good news of their own with cable receiving a pop from the latest Brexit headline. The European Court of Justice ruled that UK can unilaterally revoke its Brexit declaration making it much easier to UK to remain in EU if it wanted to. Although PM May faces a massive barrier to getting her deal through Parliament, the market now expects that regardless of what path UK will take, it will remain firmly anchored within the EU customs union which should minimize any possible disruption of the UK economy. Having survived several runs at the 1.2700 level, cable popped back above 1.2800 and could push towards 1.2900 over the next few days. Although there is still a risk of a hard Brexit, the odds have diminished greatly over the past few weeks and cable should respond accordingly to as uncertainty dissipates.

In Europe, the ongoing talks between Italy and EU and hotter than expected CPI data which printed at 0.8% vs. 0.5% eyed helped lift euro past the 1.1400 figure. That level acted as a cement ceiling for the past few days, but today’s price action suggests that EURUSD may have set a short-term low yesterday and the pair could inch its way back towards 1.1500 over the near-term horizon, especially if US yields continue to slide lower as the day proceeds.

Boris Schlossberg
Managing Director

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