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Dollar gains as global squeeze takes hold

Investors are eyeing safe havens as concerns over a global economic slowdown are rising. Will the Fed shed more light on its 2019 interest rate strategy as it meets for the final time in 2018 tomorrow?

Dollar drops on Fed’s dovish rhetoric

The Dollar Index, which gauges its value against six major currencies, is close to a 19-month high as rising concerns over a global economic slowdown pushed investors to safe havens.

Data released on Friday, 14 December showed that confidence across the Eurozone is slipping at an alarming rate, with the French Purchasing Managers’ Index (PMI) sliding into contraction territory and German data missing expectations. The combined Eurozone PMI data dropped from 52.8 to 51.3, suggesting that French President Emmanuel Macron’s recent concession to protestors over the minimum wage and Brexit fears are having a negative impact on the bloc.

Investors will keep a keen eye this week on the US ahead of the final sitting of the Federal Open Market Committee this year. The two-day meeting starting tomorrow, 18 December, will culminate in the announcement of the Fed’s interest rate decision on Wednesday. The policymakers will also release guidance for the 2019 path of interest rate rises, with previously planned three increases unlikely to now be on the table on fears the global economy is slowing down.

UK Prime Minister Theresa May has resisted calls from within her Cabinet over the weekend to give power to Members of Parliament to find a solution to break the deadlock on Brexit.

The UK Parliament stands for recess on 20 December. This means unless concessions or a meaningful vote on the Brexit withdrawal agreement take place at a short notice beforehand, investors will stay in the unknown until at least 7 January 2019 when the House of Commons returns.

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