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The US dollar climbed again yesterday despite an uptick in inflation.
Headline US inflation climbed to 2.6% in October, a development which failed to put the brakes on the US dollar’s barnstorming week. Sterling fell on publication off the news but recovered some of its momentum by the end of the end of the afternoon session.
GBP/EUR traded in a narrow range and ended proceedings around where it started. Another strong day for the US dollar was capped by a further half-cent advance on its European rivals, continuing a streak of successes which began in the days before the US election.
The US core inflation number came in at 3.3% in October — unchanged from September — while the monthly gauge registered a 0.3% increase, the same pace as both September and August. Ongoing strength in the US dollar meant that, while headline inflation had nudged up slightly, it wasn’t enough to knock it off its course.
The Bank of Japan (BoJ) looked to the US dollar’s strength with a palpable sense of unease. With the US dollar advancing, markets are beginning to fear the BoJ will need to intervene once more to prop up its beleaguered currency. The Japanese yen has fallen steadily against the US dollar in the past weeks.
At the end of a long counting process, the Republicans are on course for a clean sweep across both House and Senate. This would likely give president-elect Donald Trump carte blanche to usher through a more radical legislative agenda compared to his first term. Trump is currently in the process of selecting his cabinet and his choices of Elon Musk and Vivek Ramaswamy to hold government advisory positions have already been raising eyebrows.
UK-based home improvement chain Homebase is set to announce administration for its UK operations, putting dozens of stores and hundreds of jobs at risk. The outlet operates 130 stores and said the measures would save around 1,600 jobs, although the fate of many others remains unclear.
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GBP: Pound awaits GDP
Sterling has been batted about this week in the face of overwhelming US dollar strength. Its next chance to seize the narrative is with GDP tomorrow, although few economists are predicting a serious uptick in economic growth.
GBP/USD: the past year
EUR: Latching onto snap election
The euro limited any major losses yesterday with the help of some much-needed certainty coming out of Berlin. The major parties have set a date for a vote of confidence in the current coalition, clearing a path to a snap election in late February.
GBP/EUR: the past year
USD: Another Powell speech
Fed chair Jerome Powell faces the media again on Thursday and can expect many more questions about his relationship with Donald Trump. Powell was notably frosty in answering those questions last week but US markets certainly see the politics of central banking as a potential flash point over the next four years.
EUR/USD: the past year
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