Dollar edges up ahead of Federal Reserve

On Monday, the Dollar firmed against its major counterparts underpinned by expectations of higher US interest rates. The US Fed is widely expected to raise interest rates at its twoday policy meeting that will end today, and is seen as possibly tightening two or three times in 2018. But still sluggish inflation is still weighting on next year’s policy outlook. Meanwhile, US employment data last Friday showed that the economy added 228,000 jobs in November 2017, beating expectations of a rise in jobs of 200,000. However, the Dollar’s gains were capped by downbeat wage data. Average hourly earnings increased 2.5% from a year earlier, less than the 2.7% projection, and October’s figures were revised lower. The jobless rate held at 4.1%, the lowest since late 2000.

On Monday as well, Sterling edged higher but well off Friday’s high of $1.3521 hit after a breakthrough in Brexit negotiations. Britain and the EU reached an accord last Friday that paves the way for talks on future trade ties, easing immediate pressure on Theresa May and raising investors’ hopes for an orderly Brexit. May hailed “a new sense of optimism” in Brexit talks on Tuesday, telling parliament and the EU that they should sign off on a deal at a summit this week “to move forward together” to discuss future trade ties.

In the meantime, Oil prices fell, pulled down as the latest surge in the US rig count pointed to a further rise in American production, undermining efforts led by OPEC to tighten markets. Rising US output threatens to undermine efforts led by the OPEC and a group of non-OPEC producers, most importantly Russia, to support prices by withholding supplies.