The US$ made its biggest daily gains for a month on Friday, underpinned by higher Treasury yields, on the back of the news of some progress on U.S. tax reform, raising the prospect of a fiscal lift to the economy and bolstering investor appetite for risk. The dollar made good gains against most pairs. At the same time, Sterling had a good session after some more positive news from the Brexit negotiations after Prime Minister Theresa May’s appearance in the EU summit at which she pledged to examine the Brexit bill line by line and could be willing to pay more than EUR 20Bto the EU, and not dismissing the possibility of paying EUR 60b. In other markets, US stocks surged higher again , to new all time highs, while the metals were pressured lower by the stronger dollar and WTI settled higher as political tensions in Kurdistan continued to disrupt crude supplies offsetting signs of wavering U.S. demand.
The week starts off with the Japanese election results, at which the status quo is expected to be maintained although it will otherwise be a fairly quiet session for economic data. It may be the Catalonian issues that have the biggest impact on Monday, and data releases could well play second fiddle to politics. The global flash PMIs will be in focus on Tuesday, while Wednesday kicks off with the Australian CPI, to be followed by the German IFO Business Climate/Expectations, the UK Inflation Report Hearing and then the US Durable Goods Orders and New Home Sales. Thursday sees the ECB Interest Rate Decision and Mario Draghi’s Press Conference, which will be eagerly waited for any sign of tapering the QE programme. Later in the session the US Pending Home Sales will be in focus. Friday will be quiet until late in the day, when the Provisional Q3 GDP will be released. Have a good week.
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