FX market outlookPosted on Tuesday, September 12 2017 at 8:30 am GMT+0000
Dollar builds on gains as risk sentiment rises; pound vs euro hits 1-month high
The dollar maintained its strength against its rivals during the Asian trading hours as experts downgraded the impact of Hurricane Irma, while the UN Security Council approved a lighter package of sanctions on North Korea. Meanwhile, the British government won the vote on the EU withdrawal bill, lifting the pound to a one-month high versus the euro.
With the economic calendar lacking significant releases, the greenback continued its uptrend in Asia as, for the moment, investors ruled out extreme weather in the US and fresh tensions in the Korean peninsula.
Florida’s residents were on the way back home after two days since Hurricane Irma hit the area with powerful winds, turning roads into rivers and causing destructive damage. However, Irma’s impact was downgraded on Monday, supporting US economic growth a week before Fed policymakers meet to decide on interest rates.
In the meantime, the 15-member UN Security Council, which held an anonymous vote yesterday, decided to impose a softer punishment to North Korea, which has so far defied global calls for termination of its aggressive nuclear program. Particularly, the council approved a draft resolution in which it added restrictions to the regime’s textile exports and fuel supplies, while it also withdrew an oil embargo and entirely relaxed restrictions on Kim Jong-Un’s assets.
Following the aforementioned news, the dollar index climbed near the 92 key level, before edging down to 91.80. Dollar/yen was up by 0.16% on the day at 109.57, while dollar/swissie was trading mainly flat in Asia around 0.9554.
The safe-haven gold lost ground for the third consecutive day, falling close to a two-week low of $1,323.15 per ounce.
In the UK, the Parliament welcomed the vote on the EU repeal bill overnight after eight hours of debating, driving sterling to a one-month relative to the euro as euro/pound fell to 0.9063. Pound/dollar was up by 0.24% at 1.3195. The UK prime minister, Theresa May, commenting on the vote, which aimed to attach the EU laws on the British legislative framework and thus facilitate business activities, said that now the bill could move to the next level with “solid foundations”.
Later in the day, investors will keep a close eye on inflation figures out of the UK which come before the Bank of England’s policy meeting on Thursday. Expectations are for the yearly CPI reading to increase by 0.2 percentage points in August to 2.8%.
Regarding energy markets, oil rebounded as fears over a slowdown in demand receded and more US refineries along the Texas Gulf Coast restarted their operations. WTI crude oil jumped to $48.09 per barrel after it sank slightly below the $47 key level on Monday. London-based Brent rose to $53.71 per barrel.
Due to increasing oil prices, the commodity-linked loonie gained against the dollar, leading dollar/loonie down by 0.12% to 1.2094.