Euro higher despite disappointing CPI data
The euro climbed higher on Monday despite weaker than forecast CPI data. Eurozone inflation slipped by more than forecast in November to 1.9%, well down from 2.2% the month previous and below the 2% forecast. With fears of an economic slowdown in the eurozone growing, softer than forecast inflation has done little to soother concerns. It was only thanks to a soft dollar story that the euro was able to mov higher.
Dollar drops from 18 month high
The dollar was trading 0.3% lower versus a basket of currencies as investors digested disappointing data and looked ahead to the Fed’s policy announcement on Wednesday. Empire Sate Manufacturing index was lower in December, adding to concerns over the health of the US economy. The index printed at just 10.9, down from 23.3 in November.
Looking ahead to Wednesday, whilst the Fed are broadly expected to raise interest rates on Wednesday for the fourth time this year, investors are anxious about what the Fed have in store for 2019. After some recent dovish comments from the Fed about rates nearing neutral, weak Empire manufacturing data and another round of Fed bashing from Trump investors were seeing few reasons to stay long the dollar.
Gold regains its shine
The weaker dollar helped gold regain its glitter and bounce back from a 2-week low. Gold had dived as the dollar reached an 18-month high. Fed expectations are going to drive the markets over the coming days; more dovish signals on Wednesday from the Fed could keep the gold bulls in control.