SwanBitcoin445X250

DXY

US DOLLAR FUNDAMENTAL FORECAST: BULLISH

  • US Dollar[1] may find boost from Brexit drama, Italy vs EU budget fight
  • PMI surveys may prompt rethink of dovish shift in Fed rate hike bets
  • US Thanksgiving holiday to drain liquidity into the end of the week

See our US Dollar forecast[2] to learn what will drive prices through the end of the year!

Homegrown schedule event risk will be sparse in a holiday-shortened week ahead, leaving the US Dollar at the mercy of European politics once again. Liquidity will begin to drain ahead of market closures for Thursday’s Thanksgiving holiday and is likely to remain diminished into the weekend.

Heading into the holiday lull, crosscurrents from Europe are likely to remain in focus. In the UK, Prime Minister Theresa May is struggling to keep her job[3] as eurosceptic members of her own Conservative party balk at the Brexit deal she negotiated with the EU.

If she is deposed and her accord with Brussels torn up, the probability of a chaotic “no-deal” Brexit will soar because there is almost certainly insufficient time to cobble together a replacement before a March deadline. Such a prospect is likely to trigger market-wide risk aversion, boosting the Greenback.

Italy is another flashpoint. The European Commission will offer its assessment of Rome’s resubmitted budget on Wednesday, which is unchanged from the one it has already pegged as violating regional fiscal rules. If that paves the way for escalating tensions and punitive action[4], the Dollar may enjoy a further lift.

November’s preliminary PMI surveys – due Friday – amounts to the most potent bit of data flow on

Read more from our friends at Daily FX: