It’s a familiar story but Thursday was another poor day for the US Dollar. With the EUR and GBP well bid, and the AUD and NZD back within touching distance of their 2018 highs, the Dollar’s index against a basket of major currencies fell from a high in Asia of 90.61 to a low in the New York afternoon of 90.05. This morning in Europe it’s been lower still, with a fresh low for 2018 of 89.89. Equally as familiar as the dollar’s drop is that it came despite yet another good set of economic numbers. Last week, we saw higher core inflation and retail sales numbers. On Wednesday, industrial production surged +0.9% in December as very cold weather at the end of the month boosted demand for heating. Yesterday we learned that weekly jobless claims Jobless decreased by 41k to 220k; their lowest level since February 1973 and the biggest weekly biggest drop since April 2009. The figures suggest the unemployment rate of 4.1%, already the lowest since 2000, could be set to fall further. The latest week for claims
includes the 12th of the month, which is the reference period for the Labour Department’s monthly employment surveys. Rather than look at the incoming data, the USD is being spooked by headlines that US Senate majority leader Mitch McConnell is making contingency plans for the growing possibility of a government shutdown. Congress is facing a January 19 deadline (today) to pass a spending bill, which helps determine the government’s budget and discretionary spending for the fiscal year. Without it, the government will shut down. This would be truly surreal. It would be the first time ever that a party which controls the White House, Senate and House of Representatives has overseen a government shutdown. During the last government shutdown in October 2013, 850,000 federal workers were furloughed, equal to nearly 40% of the government workforce. The shutdown lasted for 16 days, triggered by a disagreement over Obamacare. According to Standard & Poor’s, it cost the economy $24 billion. The US Dollar index opens in North America this morning at 90.05 but keep an eye on US 10-year bond yields which - at 2.63% - are close to a 40-month high.