Major currencies were moving sideways during the European session on Thursday as investors were widely anticipating whether Republicans would pass their tax code in the House of Representatives later today. Economic releases out of the Eurozone, the US, the UK, and Canada were also in focus but had a moderate impact on the markets.
The US lawmakers were preparing for a crucial vote on tax reforms in the House of Representatives on Thursday after 1830GMT, with Republicans feeling confident that their tax version would gather enough votes. The biggest threat, though, comes from the Senate, with two Republicans expressing misgivings about the Senate version yesterday and therefore raising fears that the tax overhaul will fail to be approved before the end of the year as Trump’s team desires.
Looking at today’s US economic reports, initial jobless claims increased by 249,000 in the week ending November 11, exceeding the forecast of 235,000 and the 239,000 seen previously. This drove the four-week average measure, which is considered less volatile, up by 6,500 to 237,500. The Philadelphia Fed manufacturing index also disappointed traders, falling by 5.2 points to 22.7, below the forecast of 25.
The dollar index was in a range during the session at 93.85. Dollar/yen pared earlier gains, retreating to 112.84. Dollar/swissie jumped by 0.44% on the day to 0.9924.
In Eurozone, final figures on inflation matched flash estimates with headline CPI increasing steadily by 1.4% y/y in October but slowing down by 0.3 percentage points to 0.1% m/m. The core equivalent though, which excludes fuel and energy prices, surpassed expectations, growing by 1.1% y/y, above the forecast of 0.9%, while the monthly core measure declined by 0.1% after rising by 0.4% in September. Euro traders didn’t react much to the data. On the day, the currency extended its downtrend relative to the dollar to reach 1.1776 as coalition talks in Germany to form a government led nowhere so far ahead of a deadline set by the chancellor Angela Merkel for the end of the week. Should the parties fail to come to an agreement, Germany would be forced to go through elections once again, potentially eroding confidence in Merkel’s Conservative party and strengthening the far-right ADP.
Data on retail sales out of the UK caused moderate movements in the markets as investors were more concerned about the Brexit talks, which so far offer little clarity to business leaders as regards Britain’s future relationship with the EU. UK retail sales fell for the first time since March 2013, retreating by 0.3% y/y in October, while analysts had forecasted a bigger decline of 0.6%. September’s growth of 1.2% was also slightly revised up to 1.3%. Excluding automobiles and fuel, the gauge retreated by 0.3% after four-years of rising but with at a slower pace than analysts anticipated (-0.4%). The pound rebounded from a low of $1.3194 prior the data to $1.3195. Euro/pound was down by 0.27% at 0.8926.
Speaking in Liverpool in front of business leaders and students, the BOE Governor Mark Carney said that the central bank would alter monetary policy in a way to bring inflation back to the target whatever the outcome of Brexit negotiations is. Moreover, he highlighted the importance of the Brexit deal as well as the date of the implementation.
Elsewhere, stronger-than-expected manufacturing sales in Canada helped the loonie gain ground against the greenback, pushing dollar/loonie down to 1.2743 (-0.13%).
Turning to commodities, gold stood flat at $1,279.70 per ounce during the session. WTI crude inched down by 0.11% to $55.27 per barrel and Brent retreated by 0.23% to $61.73.
