The US dollar remains near its highest level over the past three weeks, one day before the Federal Reserve's latest decisions in 2017 are announced. The dollar may remain in its current range if interest rates are raised to 1.50% as expected. We could, however, witness a significant impact if interest rate expectations have changed for the new year.
The rate hike will be the fifth since late 2015, and investors will be watching the Federal Reserve's assessment of the US economy, which will show the future path of rates in 2018. The dollar is now stabilizing at 93.80 after rising by more than 1% last week, the biggest weekly gain since the end of October, but it has fallen more than 9% since the beginning of the year.
In the UK, inflation unexpectedly rose to the fastest pace in more than five and a half years in November, and the consumer price index rose by 3.1%, the biggest gain since March 2012.
Mark Carney, governor of the BoE will have to explain why inflation has risen more than 1% from the target of 2%, possibly at the February meeting as the Monetary Policy Committee starts its meetings before the interest rate decision is announced on Thursday. Although inflation is expected to see some decline in 2018, the bank raised interest rates in October for the first time in 10 years.
The pound remains under pressure, plummeting data to its lowest level against the US dollar since November 28 at 1.3310 following inflation. This comes in light of the continuing uncertainty about the Brexit negotiations in anticipation of the EU summit at the end of the week.
Brent crude prices rose more than 1% to their highest level since mid-2015, after the shutdown of the Fortis pipeline in the North Sea, leading to a drop-in world supplies to the market, which is also affected by the OPEC cut-off agreement.
Brent crude is currently traded at $65.25 a barrel while US crude is trading at $58.30 a barrel.
