USD index – strongest gain since June 2020

After a lively start to the week, Thursday was quieter and Friday looks like being a bit of a squib of the damp variety. Many markets were closed to mark the WW1 Armistice, so the volumes were down but so was the volume of data to drive activity.

As far as movers and shakers are concerned, the US Dollar is the leading light. The dollar index, which measures the USD against six other currencies, hit a fresh 16-month high of 95.26 overnight and, as long as it doesn’t collapse this week, it will be its stronger gain since June 2020. GBPUSD got down to $1.3350 yesterday but is a shade above that this morning. The EURUSD rate touched $1.1435 before flattening out and it is barely above that this morning.

US warns of Russian troops amassing on Ukraine Border

There are some emerging stories that could well impact the Euro and US Dollar in particular. The Netherlands is instigating a new partial lockdown to combat rising covid infections. We are seeing similar rises in other EU countries, so the potential effects are pretty obvious. Also, Russia is amassing troops along the Ukraine border and there are warnings from the US that an invasion could be imminent. It is like a carbon copy of the activity before Crimea was annexed. Quite apart from the impact on those in the region, such a move would strengthen the US Dollar as investors seek safety.

The data for today is limited. We will see September Eurozone industrial production this morning. That is likely to show a contraction but a smaller one than August but it follows on from the release of Spanish inflation at 5.4% on the year, up from 4.0% in September. Whilst that was just Spain and not the whole of the Eurozone, the ECB has a dilemma on its hands and the term ‘Stagflation’ is being bandied about … after being translated into 27 different languages of course.

The GBPEUR rate is still in a shallow downtrend but the low and high levels are now €1.1650 to €1.1720. Anything above or below here is tantamount to a breakout. Sterling traders are looking ahead to next week’s UK employment, inflation, and retail sales data. And euro traders are awaiting the Eurozone inflation data.

We will also see US retail sales and Chinese industrial production data. So it looks set to be a busy week for all concerned.

Meanwhile, have a great weekend one and all.

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