Greenback Finds Its Way Back

The pound and the dollar were the talk of the markets yesterday as both of them went in opposite directions for the day yesterday. The UK PM May announced that the UK should brace itself for a hard Brexit and that they would be seeking for a complete and total removal from the Eurozone. But she also made it clear that the UK government would be negotiating for a different type of free trade zone with the euro leaders when the negotiations begin so that the trade between the UK and the Eurozone does not get affected much. Though it is still not clear what this kind of deal would be, the markets were generally happy that atleast some clarity has been made available of this process and the markets showed their appreciation by pushing the pound higher against all the other currencies.

Meanwhile, the dollar continued to sink as it was faced with the risk of a new administration and a new direction after 8 years. Trump is about to take office on January 20 and it is still not clear what direction his administration is likely to take in terms of economic and fiscal policy. This presents a risk to the markets and that is why we have been seeing the dollar weaken across the board for the past couple of weeks though the good news of 3 rate hikes from the Fed this year continues to flow. But this news has had little impact on the dollar so far.

Looking ahead to today, we have the claimant count change and average earnings data from the UK and we also have the rate announcement and the rate policy statement from the BOC followed by the press conference from the BOC governor. This could bring in a lot of volatility in the USDCAD pair which has also been under pressure of late due to the continued strength in the oil prices and the weakening of the US dollar.
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