The dollar hit a 14-year high against a basket of currencies on Wednesday as a post-U.S. election sell-off resumed across global bond markets, lifting Treasury yields and attracting investors to the U.S. currency. Equity markets reflected this with Europe's main indices down as much as 0.8 percent and Wall Street expected to open 0.5 percent lower.
U.S. President-elect Trump's plans to cut taxes and boost infrastructure spending would boost economic activity while his proposals to deport illegal immigrants and impose tariffs on cheap imports are seen driving inflation higher. That prospect has given rise to expectations that U.S. interest rates will rise faster than previously anticipated, boosting the dollar.
Sterling traded flat against the dollar on Wednesday, barely reacting to data showing Britain's jobless rate had fallen to the lowest level in 11 years, with investors focusing instead on the risks surrounding Brexit.
The latest figures showed Britain's unemployment rate fell in the first three months after the Brexit vote to 4.8 percent, but there were some signs that a slowdown in the labour market could be coming.
Politics have dominated on currency markets in recent months and, with Britain's exit from the European Union still shrouded in uncertainty, sterling has become much more sensitive to developments in that process than to economic data. Adding to pressure on the pound was a lower than expected inflation reading, which showed price growth still below half of the Bank of England's 2 percent target. However, sterling later recovered some of its losses as analysts brushed the memo off, after both the prime minister's office and Deloitte - which was responsible for the memo - denied that the report had been commissioned by the government.
09.00 – GBP : Retail sales MoM; forecast at 0.5% against previous of 0%
13.30 – USD : Building Permits; forecast at 1.19M against a previous of 1.23M
13.30 – USD : GDP MoM; forecast at 0.4% against a previous of 0.3%
13.30 – USD : Core CPI MoM; forecast at 0.2% against a previous of 0.1%
13.30 – USD : Unemployment Claims; forecast at 257k against a previous of 254k
15.00 – USD : Janet Yellen testifies about the economic outlook before the joint Economic Committee in Washington