Dollar index rises to 13-year high

The main focus at the start of the week remains the story of USD strength, with the dollar index rising to a 13-year high in recent days. Partly this is the result of Fed Chair Janet Yellen coming as close as possible to confirming a December rate hike last week, saying that a tightening could become appropriate relatively soon. Economic data has also certainly been supportive of late, with housing starts in October soaring 25% and consumer confidence also coming in strong. And of course markets are also pricing in a possible shift in the direction of economic policy that could be announced and implemented by the Trump White House next year, despite the fact that the details of any plans will not become apparent until after the inauguration in January.

The coming week could be relatively quiet due to Thanksgiving in the United States, however there are still some important data releases to monitor. U.S. data is expected to be strong, and includes the latest durable goods report and more housing figures, while the minutes from the last FOMC meeting will also be published. The UK in contrast faces a potentially difficult week with public finance data expected to highlight the challenges that lie ahead for the Chancellor in seeking to cut the budget deficit, while avoiding rocking the Brexit boat. The Chancellor’s Autumn Fiscal Statement will likely water down spending cuts and direct new expenditure towards infrastructure.

The Central Bank of Egypt voted to keep interest rates unchanged at its latest monetary policy meeting on 17 November, after the overnight deposit and lending rates were hiked 300bps to 14.75% and 15.75% respectively earlier in the month alongside the devaluation of the Egyptian pound. Authorities are likely eager to begin easing policy as quickly as possible given the impact that higher interest rates will have on the budget, and activity across the private sector economy. According to comments from the country’s finance minister yesterday, the government is now studying whether to issue new international bonds at the end of November or early December, or delay it until the first half of January 2017. 

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