Last Thursday, the Euro surged and hit a two-week high of $1.1880, after a slew of strong data supported a growing view that the European Central Bank will announce a plan to wind down its huge stimulus plan at a policy meeting later this month. Meanwhile, ECB Mario Draghi defended a pledge to keep rates at rock bottom, batting back German calls for a speedy exit from years of easy money in the Euro zone. He said that the promise to maintain rates at their current level “well past” the end of its Bond-buying program was very important for keeping borrowing costs at bay.
The Dollar and US Treasury Yields were poised to end four weeks of gains as confidence in American tax-cut plans waned somewhat and the Federal Reserve signalled that several policy makers were cautious about another 2017 interest-rate hike. Producer price index for final demand increased 0.4% month on month and 2.6% year on year in September 2017, the biggest annual gain since February 2012. Applications for unemployment benefits slipped to a more than one-month low last week as the boost to claims in Texas and Florida from Hurricanes Harvey and Irma continued to unwind.
Last week as well, Sterling rose against the Dollar, after German paper Handelsblatt reported that EU negotiator Michel Barnier may offer the UK a two-year transition period to stay in the union. The Pound’s surge reversed steep losses that followed a report that Brexit negotiations had stalled.