In Washington the U.S. central bank taps the brakes to cool the world’s biggest economy, as it is poised to do again this week, the effects ripple far and wide. Complaining does not bring much, though some officials have called on the Fed to be more sensitive to the impact its actions have on emerging markets, or to at least better telegraph its intentions. U.S. President Donald Trump has also blasted the Fed for going too fast and too hard, with little success. By raising interest rates and shedding its own asset holdings, the Fed makes U.S. government bonds more appealing relative to riskier overseas investments. This effectively tilts the playing field against emerging markets by boosting demand for dollars at the expense of other currencies. The central bank acknowledges its influence extends beyond U.S. borders, but argues it is bound by a mandate of containing inflation and seeking maximum employment at home.
In main currencies, regarding EUR/USD there was no particular catalyst for broad dollar’s weakness but cautious ahead of the looming Fed’s monetary policy meeting tomorrow, as speculative interest fears the central bank will decide to announce a pause, or at least a slower pace in future rate hikes. Regarding GBP/USD, UK Prime Minister Theresa May delivered a fresh round of talking points on Brexit before the UK’s parliament on Monday, but little new developments were delivered, and PM May also announced that she will be withholding her current Brexit proposal from a parliamentary vote until mid-January.
In commodities, Gold is looking north ahead of the FOMC rate decision while the markets believe that the Fed will adopt a “wait and see” approach for 2019. Oil took a turn lower on Monday and WTI knocked below the critical 50.00 level as energies traders continue to balk at rising US oversupply.
For today there are no high impact news, however worth to attend the German Ifo Business Climate and the US Building Permits.