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By xemarketanalysis January 19, 2018 12:24 pm
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    XE Market Analysis: Dollar Recovers Slightly as Government Shutdown Looms


    • UK retail sales disappoint.
    • US consumer confidence weakens for a 3rd straight month.
    • Canadian manufacturing sales post the biggest increase in 2.5 years.
    • Fears over US government shutdown drive risk aversion.


    UK retail sales fell sharply last month as consumers continued to be squeezed by real wage declines. From November they fell 1.5% and rose just 1.4% versus a year previous which made it the worst December since 2010. "The longer-term picture is one of slowing growth, with increased prices squeezing people's spending," ONS statistician Rhian Murphy said.


    The Dollar is rising marginally as fears over a government shutdown intensified after senators signaled opposition to a short-term spending bill that the House passed last night. If a deal doesn't emerge by midnight, the government would partially shut down, which has seen a slight risk-off sentiment lifting the Dollar.


    The Pound hit a fresh post-Brexit high of 1.3945 versus the Dollar before grinding lower across the board after UK retail sales fell more than expected (see highlight).


    The Euro has given up earlier gains due to a shift in sentiment as the probability of a US government shutdown looks increasingly likely. Germany’s political risk remains somewhat underappreciated in the current environment, and highlight Sunday’s SPD vote as a potential source of turbulence.


    The Canadian Dollar is slightly weaker on the day but appears to have stabilized following yesterday’s volatile moves due to the Bank of Canada rate decision and statement. Lower oil prices offset domestic data showing the biggest increase in manufacturing sales in 2.5 years in November. 


    The Australian Dollar hit a fresh 4-month high versus the USD again, rising above the pivotal 80 cents level before retreating below it. Sentiment towards the Aussie remains upbeat following yesterday’s blockbuster jobs report which led the market to bring forward the likely timing of a rate hike from the central bank.


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