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Forex News: Dollar Weakens As Government Shutdown Seems Likely

Dollar Weakens As Government Shutdown Seems Likely

12/20/2018 - 14:07:00 (RTTNews)

(RTTNews) - The dollar is losing ground against all of its major rivals Thursday afternoon. While investors are still reeling from yesterday's hawkish statement from the Federal Reserve, the potential for a government shutdown seems likely.

President Trump is reportedly considering a veto of the short-term funding bill that recently passed in the Senate. Trump is said to be upset over the lack of funding for a wall on the U.S.-Mexico border.

"When I begrudgingly signed the Omnibus Bill, I was promised the Wall and Border Security by leadership," Trump tweeted Thursday. "Would be done by end of year (NOW). It didn't happen! We foolishly fight for Border Security for other countries - but not for our beloved U.S.A. Not good!"

Meanwhile, after reporting a notable decrease in first-time claims for U.S. unemployment benefits in the previous week, the Labor Department released a report on Thursday showing initial jobless claims rebounded in the week ended December 15th.

The report said initial jobless claims rose to 214,000, an increase of 8,000 from the previous week's unrevised level of 206,000. Economists had expected jobless claims to climb to 216,000.

Manufacturing activity in the Philadelphia region continued to grow but remained subdued in the month of December, according to a report released by the Federal Reserve Bank of Philadelphia on Thursday. The report said the diffusion index for current general activity dropped to 9.4 in December after tumbling to 12.9 in November.

While a positive reading still indicates growth in regional manufacturing activity, economists had expected the index to rise to 15.0.

A report released by the Conference Board on Thursday showed a modest increase by leading U.S. economic indicators in the month of November. The Conference Board said its leading economic index rose by 0.2 percent in November after falling by a revised 0.3 percent in October.

Economists had expected the index to come in unchanged compared to the 0.1 percent uptick originally reported for the previous month.

The dollar has dropped to around $1.1475 against the Euro Thursday afternoon, from an early high of $1.1377.

Eurozone's current account surplus increased in October after declining in the previous month, but was lower than the same month last year. The current account surplus rose to EUR 23 billion from EUR 18 billion in September, figures from the European Central Bank showed on Thursday. In October 2017, the surplus was EUR 35 billion.

Bank of England policymakers unanimously left the key interest rate and asset purchase targets unchanged on Thursday, as expected. The nine-member Monetary Policy Committee held its key interest rate unchanged at 0.75 percent in line with economists' expectations.

Brexit uncertainties have intensified considerably since the previous policy session and they are weighing on UK financial markets and on the near-term growth outlook, the bank said.

The bank expects inflation to fall below 2 percent in coming months due to lower oil prices.

The buck has fallen to around $1.2675 against the pound sterling this afternoon, from a high of $1.2613 this morning.

UK retail sales rose for the first time in three months in November to surpass economists' expectations, thanks to Black Friday promotions and record online spending, while the long term trend was that of a slowdown, amid the persistent Brexit uncertainties.

Data from the Office for National Statistics showed on Thursday that the volume of retail sales including automotive fuel rose 1.4 percent from October, which was much faster than the 0.3 percent growth economists had predicted.

The Bank of Japan left its ultra-loose monetary policy unchanged on Thursday, asserting its pledge to keep interest rate extremely low for an extended period of time amid indications of global economic slowdown.

The policy board of the BoJ voted 7-2 to purchase government bonds so that the yield of 10-year JGBs will remain at around zero percent.

The greenback has tumbled to over a 3-month low of Y111.050 against the Japanese Yen Thursday afternoon, from an early high of Y112.604.

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