While investors were looking for riskier purchases after North Korea confounded rumors of an intercontinental ballistic missile test on Saturday, the euro retreated following the dovish remarks made by ECB member, Benoit Coeure, in Frankfurt. Meanwhile, the pound drifted higher during the European trading ahead of a busy data week and before the BOE policy meeting on Thursday.
The dollar continued gaining against its rivals in Europe as geopolitical risks eased on Monday. However, investors were focused on the outcome of the UN National Security Council meeting today, which will vote whether to impose stricter sanctions on North Korea. The isolated regime, which seems to defy global calls for termination of its nuclear programs, warned the US early on Monday of a counter-military attack if the US continues threatening the country with further sanctions.
Meanwhile, in the US, authorities were counting the damage caused by the ongoing Hurricane Irma, a week before the Fed policymakers meet to decide on interest rates. Although expectations are for the central bank to keep rates unchanged, as recent inflation data came in weaker than expected, the financial impact of the deadly natural disasters has wiped out any chance of another rate hike this year. Besides that, Trump said on Saturday that he would ask Congress to speed up the efforts to reform the US tax code given the costly damage from Hurricanes Irma and Harvey. On Friday, the President also recommended congressional policymakers to proceed with tax reforms before the end of September.
The dollar index was up by 0.28% on the day at 91.64. Dollar/yen and dollar/swissie reversed Friday’s losses rising to 108.76 and 0.9526 respectively.
The safe-haven gold tumbled by 0.86% to $1,335 per ounce.
In contrast, the euro was pressured against the greenback during the European session as ECB member, Benoit Coeure, said on Monday in Frankfurt that the "medium-term period", in which inflation is said to approach the ECB target of 2%, might last longer if exogenous shocks to the strengthening exchange rate persist. Though Coeure added that the impact of the exchange rate on the block’s economic growth might be softer than the one after the recent financial crisis, as the region’s expansion is mainly based on higher domestic demand. The common currency dived into losses after the comments, falling to $1.1982.
Elsewhere, Britain’s House of Commons will put the EU repeal bill, which aims to attach European laws into Britain’s legal framework, on the table later today. Despite expectations being for the government to win the vote, the paper might find obstacles to turn into law when it passes to the second stage in front of the committees, where ministers might propose amendments.
Moreover, a stream of economic data out of the UK, including inflation and unemployment rate figures, will be eyed during the week before the Bank of England’s policy meeting on Thursday.
The pound managed to climb near the one-month high of $1.3223 it touched on Friday, but it slipped to $1.3193 afterwards.
Looking at energy markets, Saudi Arabia’s discussions with Venezuela and the non-OPEC member Kazakhstan to extend global supply cuts beyond March 2018 failed to lift oil prices further. The markets were mostly worried that Hurricane Irma hitting densely populated areas in Florida, could dampen oil demand in the US, the world’s largest oil-consuming nation in the world.
WTI crude dropped by 0.80% to trade at $47.10 per barrel during afternoon European trading hours, while Brent fell by 1.30% to $53.08.
The loonie lost ground against its US counterpart amid declining oil prices and a strengthening dollar despite Canadian housing starts for the month of August coming in better than expected. Dollar/loonie jumped to an intra-day high of 1.2158 before sliding to 1.2143.
