Via Bloomberg
The strong jobless claims data yesterday was a boost to the USD yesterday. This saw the Dollar Index pushing into the 98.50 overhead resistance level, think about pushing through and then remembering its NFP today. Looking primed for a breakout on good jobs number, it is worth remembering that there is some good upward pressure for the dollar at the moment from the EU-UK trade talks
EU Looking to niggle UK Financial Sector
The EU is looking to alter the post financial crisis 'rulebook' known as the MiFid2 by moving away from some concessions it made to the UK. The EU and the UK are now buys fighting over their assets in a messy 'divorce' / new terms of engagement. Fishing rights and financial services are the major battle grounds.
How this impacts the Dollar Index
The US Dollar Index is a measure of the value of the US dollar in relation to the value of a basket comprised of some of the US's most important trading partners. The Index is comprised of six foreign currencies. Due to the fact that all these countries are not the same size ,the Euro for example comprises of 23 countries, the USD Index gives varying weight to each currency. The biggest proportion of the Dollar Index (USDX) is made up of the EURO which has a 57.6% weight. The currencies are weighted in the following ways:
- The Euro (EUR), 57.6% weight
- The Japanese Yen (JPY), 13.6% weight
- The Great British Pound (GBP), 11.9% weight
- The Canadian Dollar (CAD), 9.1% weight
- The Swedish Krona (SEK), 4.2% weight
- The Swiss Franc (CHF) 3.6% weight
It will become immediately apparent that the Index is heavily influenced by the Euro and the GBP with nearly 70% of the whole index impacted by these two currencies. A good NFP reading today and the DXY should smash through overhead resistance
The bottom line is that the USD stands to benefit from a protracted EU-UK trade negotiation.
