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US Shutdown weakens US Dollar further

The dollar was pinned near a three-year low today as a U.S. government shutdown encouraged investors to add to bearish bets against the greenback while the euro consolidated recent gains.

Unless the U.S. government shutdown ends very quickly which may boost the dollar, markets are focusing on the two other economies this week, namely the BOJ and the ECB with the latter likely to surprise.

Recent data and political developments, especially in Germany have proved to be supportive of the euro, with business sentiment remaining optimistic and capital spending picking up.

Meanwhile, latest positioning data showed dollar bears extended bets against the greenback last week as political wrangling dented investor confidence.

The U.S. government shutdown took effect at midnight on Friday after Democrats and Republicans, locked in a bitter dispute over immigration and border security, failed to agree on a last-minute deal to fund government operations.

British households turned gloomier about their finances this month as their expectations about future inflation hit a near four-year high and they relied more on borrowing, according to a survey which underscored the strain on many consumers.

Britain’s economy slowed in 2017 as higher inflation – caused by the post-Brexit referendum fall in the pound – hurt the spending power of consumers.

Official data on Friday showed that 2017 was the weakest year for retail sales in Britain since 2013.

While the Bank of England expects the squeeze will ease in 2018 as inflation cools and weak wage growth ticks higher, today’s survey showed consumers – at least for now – lack this optimism.

A poll of economists published last week showed the BoE is likely to keep rates at 0.5 percent until the fourth quarter of this year, having increased borrowing costs for the first time in over a decade in November.

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