The dollar hit its highest level in nearly eight months against the euro and traded near lows against sterling on the growing expectations that the Federal Reserve will raise interest rates on 16th December. Traders believe there is a 78% chance the central bank will raise rates.
There is less political risk at play as Democrat presidential candidate Clinton is increasing her lead over Republican rival Trump, boosting dollar strength. It is two weeks till the US elections, and Clinton maintains her gains against Trump. The steady polls provide confidence for markets, which prefer a mainstream politician over a wildcard one.
US consumer confidence data caused a blip for the US dollar yesterday, capping any gains made by the dollar. Consumers were less confident in October and weren’t that confident back in September: a score of 98.6 is a significant miss over the 101 expected. Also, it is a big fall from a downwards-revised 103.5 in September.
Bear in mind that – as we have seen recently – poor data only temporarily deterred the dollar, as recent setbacks were followed by further gains. The University of Michigan’s parallel measure was quite mixed, and also retail sales were discouraging.
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