Dollar rangebound, awaiting fresh drivers - BBH

"The dollar is mostly weaker against the majors as markets await fresh drivers," note BBH analysts.

Key quotes

Global equity markets have stalled a bit, even as currencies remain largely rangebound as markets await fresh drivers.  The Nikkei was down slightly, while Euro Stoxx 600 is flat on the day in early morning trading.  The US markets are set to open higher, however, and may get the global equity rally back on track.      

Republican Senator Collins of Maine has voiced support for the tax reform bill.  This all but clinches passage when both houses of Congress vote on it this week.  The House is expected to vote today and the Senate tomorrow.  Press reports suggest that the Democrats have been searching for specific provisions that can be challenged, yet this seems like only delaying tactic.  

Sterling remains heavy due to Brexit concerns.  EU Chief Negotiator Barnier is taking a hardline approach, ruling out any sort of special carve-out for the UK financial industry in a press interview.  Barnier also warned that the UK would be subject to any new EU rules enacted during the transition period post-Brexit.  On the UK side, May’s cabinet met to discuss what sort of trade deal it will seek with the EU post-Brexit.

IFO reported December German confidence at 117.2 vs. 117.5 expected.  November was revised slightly higher to 117.6.  The euro continues to hover around the 1.18 level, awaiting fresh drivers.  

In the North American session, the US reports November housing starts and building permits.  There are no Fed speakers scheduled.  

In a close race, market favorite Cyril Ramaphosa was elected as the new ANC President over opponent Nkosazana Dlamini-Zuma.  If the ANC wins the 2019 elections, he would then become President of South Africa.  The vote was 52-48% in favor of Ramaphosa, and the outcome dealt a serious blow to President Zuma.  In a note of caution, three of the six officials elected to the ANC’s governing body are Zuma supporters and so Ramaphosa may not see smooth sailing at the top.  

Chilean assets have reacted positively to Pinera’s win.  Like South Africa, we note that Pinera does not have a magic solution to Chile’s current malaise.  Recall that Pinera’s first term coincided with the mineral boom, and that no longer holds.  Instead, he will struggle with the same problems that plagued his successor/predecessor Bachelet.

Hungary central bank meets and is expected to keep rates steady.  The bank just announced another round of easing via unconventional measures at the last meeting, and so it seems too soon to see more.  CPI rose 2.5% y/y in November, shy of the 3% target and in the bottom half of the 2-4% target range.  As such, we cannot rule out further easing in Q1.