The day’s main release pertained to US consumer confidence figures released late in the session. Those came in at a multi-year high, creating a positive backdrop for the greenback for the remainder of the day. Beyond this, new Fed chief Jerome Powell appearing before US senators, US tax reform deliberations and developments that could affect the outcome of Brexit negotiations were also gathering attention.
Powell’s confirmation hearing before the Senate Banking Committee has begun at 1500 GMT, with senators having the opportunity to pose questions; market moving comments are not to be ruled out. Through his prepared remarks, which were released during late US session yesterday, he supported a gradual rise in interest rates, representing an element of continuity from Janet Yellen. He also indicated willingness to move “decisively” against “new and unexpected threats” to the economy, while making reference to flexibility and independence from political interference in policy setting. Powell is set to succeed Fed chair Yellen once her term expires in February.
US tax reform is also on the forefront with President Trump holding discussions with Senate Republicans to steer developments in the direction his administration desires. The US Senate will be debating the tax-cut bill with a vote potentially taking place on Thursday.
The dollar index was 0.3% up on the day at 1532 GMT, distancing itself from yesterday’s two-month low of 92.50. Dollar/yen was 0.2% higher at 111.30, but not far above yesterday’s two-and-a-half-month low of 110.83. Euro/dollar traded 0.1% lower at 1.1879 after touching 1.1960 on Monday, a level last experienced in late September.
The US Conference Board’s consumer confidence index for the month of November surprised to the upside, coming in at 129.5 to hit a fresh 17-year high, contrasting expectations for a minor slowdown to 124.0. October’s reading was also revised upwards to 126.2 from 125.9. The US currency recorded gains relative to major rivals following the release.
Earlier in the day, the S&P Case-Shiller home price index showed house prices rising in September with the broadest indicator recording an increase by 6.2% y/y, advancing at a slightly faster pace than analysts’ projections of 6.1%. August’s respective reading was revised to 5.8% from the previous 5.9%. The index is advancing “at the fastest annual rate since June 2014” said S&P Dow Jones indexes managing director David Blitzer, while stating that indicators support the case for additional gains in home prices. Dollar/yen didn’t react much within the first minutes of data release.
Unlike the year before, the Bank of England’s stress tests for the current year saw all banks pass. The central bank also said that UK banks can withstand a disorderly Brexit, while acknowledging the costs from such an outcome. In addition, effective next November, the BoE doubled the counter-cyclical buffer large banks must hold to 1.0%. This is to be reviewed next year and is estimated to result in an increase in costs by around 6 billion pounds (close to $8bn).
The Irish border issue, a key consideration and one holding Brexit discussions back from moving to the next level, was getting even more complicated in recent days with the Irish government being at the brink of collapse. The party supporting the minority government was demanding the resignation of deputy prime minister Frances Fitzgerald over a police scandal in order to continue backing the government. Fitzgerald decided to resign today, perhaps easing the UK government’s concerns as it was given a December 4 deadline to present improved positions on the key Brexit issues in order for EU leaders to approve the beginning of talks on trade relations between Britain and the EU during the December 14-15 summit. Pound/dollar was last 0.4% down on the day at 1.3262 and euro/pound traded 0.25% up at 0.8955.
Dollar/loonie was 0.3% up on the day and just above the 1.28 handle ahead of the Bank of Canada’s Governor Stephen Poloz and Senior Deputy Governor Carolyn Wilkins participating in a press conference at 1630 GMT.
In commodities, gold was flat at $1,294.60 an ounce. Yesterday, it came close to the $1,300 level, recording a one-and-a-half-month high. WTI and Brent crude were lower by 0.1% and 0.3% at $58.04 and $63.64 per barrel respectively. The API weekly report which includes information on US crude stocks is due at 2130 GMT.