Investing.com -- The dollar is higher against most of its peers early Wednesday in Europe as a steady drumbeat of gloomy news about the economic outlook keeps a firm cap on risk appetite.
U.S. housing and consumer confidence data both fell short of expectations Tuesday, and the negative tone was sustained overnight by the Reserve Bank of New Zealand’s surprising announcement that its next move in interest rates is more likely to be down than up. The news sent the kiwi plummeting by 1.5% against the dollar, and dragged the Aussie down in sympathy.
To reinforce the gloom, China said the profits reported by its large industrial companies had slumped 14% year-on-year in the first two months of 2019.
Paradoxically, that news has dented the euro more than the yuan, due partly to the dependence of the euro zone’s fortunes on exports to China. At 04:00 AM ET (0800 GMT), the euro was at $1.1253 against the dollar, just off its lowest level in over two weeks.
The dollar index, which measures the greenback against a basket of six major currencies, was at 96.442, up around 0.2% from late Wednesday in the U.S.
In the course of the European morning, confidence surveys of French consumers and Italian and Spanish businesses will indicate whether there is any meaningful counterweight to an increasingly gloomy outlook in export-dependent Germany, the region’s largest economy.
There will also be a series of speeches by senior European Central Bank officials. President Mario Draghi kicked off a closely-watched conference by repeating that the downside risks to the euro zone economy have increased.
"We are now seeing a more persistent deterioration of external demand. But a “soft patch" does not necessarily foreshadow a serious slump," Draghi said.
Sterling was also higher against the euro in early trade ahead of a series of ‘indicative votes’ in parliament on alternatives to Prime Minister Theresa May’s EU Withdrawal Agreement. The votes are due in the evening in London. However, May’s deal is not yet dead: a number of hard-line Brexiteers signalled on Tuesday that they would back it rather than risk Brexit being cancelled altogether.
Sterling remains difficult to trade, however, inasmuch as developments that promise a more benign long-term outcome - such as a lengthy delay to, or an outright cancellation of, Brexit - also extend the period of uncertainty that markets have to contend with.
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