Dollar Extends Gains amid Growing European Risk


The dollar index which measures the greenback against a basket of currencies climbed to a sixteen-month high of 97.40 ahead of the European trading session. The dollar advanced last week following the results of the US midterm elections, and the confirmation of further monetary policy tightening by the Federal Reserve. The widening interest rate differential between the United States and its rivals is making the dollar more attractive to investors. The USDJPY rose to a five-week high of 114.23, and the USDCAD climbed to 1.3207. Market participants will be looking forward to the October inflation figures during the week. A better-than-expected reading should increase the chances of a rate hike in the December meeting.


The British pound weakened against major peers amid rising uncertainty over a Brexit deal. The land border between Ireland and Northern Ireland remain a key issue. The pound started the week with a gap lower on tensions within May's government. The Sunday Times reported that four ministers that support remaining in the European Union could quit May's government. The GBPUSD traded at a ten-day low of $1.2863, and the GBPNZD tumbled to a three-month low of 1.9139. In addition to Brexit developments, investors will be monitoring the Jobs report on Tuesday, the Inflation figures on Wednesday, and the Retail Sales figures on Thursday.


The Euro dropped to a sixteen-month low against the United States dollar, weighed down by Italy's budget. On Tuesday, Rome should submit a revised 2019 budget plan after the European Commission rejected the first draft last month. Moreover, last week, the EU lowered the Italian growth forecasts to raise concerns over Italy's debt and economic outlook. A new crisis could delay any tightening measures by the European Central Bank and increase the interest rate gap between the United States and the Eurozone. The EURUSD is trading at a low of $1.1265, and the EURNZD tumbled to a five-month low of 1.6765.


Gold prices plunged to a one-month low during the Asian session as the dollar strengthened. The gold ounce traded at a low of $1204, and the silver ounce tested a two-month low of $14.04.


Oil prices bounced-off a multi-month low as the Kingdom of Saudi Arabia claimed to cut its oil exports in December. The announcement came after prices declined more than 20% since early October. The Saudi energy minister said that Aramco's exports would fall by 500,000 barrels per day during December. Moreover, OPEC is planning to cut production in 2019 as the global demand is likely to decrease due to a global economic slowdown. Despite falling prices, the U.S. energy services firm Baker Hughes reported a rise in U.S. oil rig count to 886, the highest since 2015. The West Texas Intermediate crude futures climbed 2.3% to a high of $61.26, and the Brent futures gained 3.0% to a high of $71.80.

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