Dollar grinds higher on hopes for tariff delay; Swedish crown surges

The dollar rose 0.2pc against a basket of currencies and 0.1pc versus the euro to $1.1080. The pound was last
11 Dec, 2019
  • The dollar rose 0.2pc against a basket of currencies and 0.1pc versus the euro to $1.1080.
  • The pound was last down 0.3pc at $1.3120, while against the euro it was 0.2pc lower at 84.485 pence.
  • The euro fell 0.6pc versus the crown to 10.479 crowns, a 7-1/2 month high for the Swedish currency.

The notable movers in foreign exchange markets were the Swedish crown that surged after higher-than-expected inflation numbers, and the British pound, which shed 0.3pc after a poll showed the ruling Conservative Party's lead narrowing.

FX markets were broadly range-bound, however, with investors awaiting Thursday's British general election, a European Central Bank meeting and the Dec. 15 trade deadline.

Wednesday sees little in the way of key economic data, with the big policy and political events of the next 48 hours the main focus for markets.

The dollar rose 0.2pc against a basket of currencies and 0.1pc versus the euro to $1.1080, helped by a Wall Street Journal report of officials from both the United States and China saying the groundwork was being laid to push back the tariff deadline.

"The trade negotiations will be key. You could argue there is a degree of complacency here," said Neil Mellor, an FX analyst at BNY Mellon.

Mellor said he thought the Federal Reserve meeting would be a "damp squib", while Christine Lagarde's first policy meeting at ECB chief was unlikely to produce any fireworks.

Economic uncertainty stemming from the U.S.-China trade war has prompted the U.S. Federal Reserve to cut interest rates three times this year.

It is almost unanimously expected to leave interest rates unchanged on Wednesday.

Sterling's recent rally came to a halt after the latest poll pointed to a tighter election race in Britain than many investors have expected.

The pound was last down 0.3pc at $1.3120, while against the euro it was 0.2pc lower at 84.485 pence.

"With regards to both the U.K. election and U.S.-China talks, markets have been leaning towards optimism recently.

Therefore we need to be careful about market reactions if those expectations do not materialise," said Kyosuke Suzuki, director of foreign exchange at Societe Generale.

Sweden's crown enjoyed a bounce after stronger than expected consumer price inflation data for November.

The euro fell 0.6pc versus the crown to 10.479 crowns, a 7-1/2 month high for the Swedish currency.

The dollar was unchanged against the Japanese yen at 108.75

The New Zealand dollar slipped 0.3pc to $0.6526 NZD=D4 as profit-taking overshadowed upbeat data and the promise of fiscal stimulus by Wellington.

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