American FX Outlook: Fear of US government shutdown drives Dollar lower

What you need to know before markets open:

• Today is the final day before the US government shutdown with the House approving the short-term extension on government financing and the US Senate now expected to confirm the move.
• The US oil output is set for “explosive” growth in 2018 as prices rally, potentially offsetting a further collapse in Venezuela’s production, the International Energy Agency predicted.
• The US Dollar is in the spotlight with the threat of the US government shutdown haunting the markets with little fundamental support on the macro data front.

Friday’s market moving events

• Canada’s manufacturing sales are seen rising 2.0% m/m in November
• Michigan consumer confidence is set to increase to 97.0 in January.
• The Federal Reserve Federal Reserve Vice Chairman for Supervision Randal Quarles is scheduled to speak on bank regulation at the "American Bar Association - Banking Law Committee Annual Meeting" in Washington at 18:00 GMT
• San Francisco Federal Reserve President John Williams is set to speaks at the Bay Area Council Economic Institute 11th Annual Forecast Conference: "Visualizing the Future of the Bay" in San Francisco at 18:30 GMT

Major market movers

• The US Dollar index fell to the weakest level in three years while the US Treasuries remain steady at around 2.6% level after a recent sell-off as the US government shutdown fear weights on the US Dollar.
• The GBP/USD headed to it post-Brexit high of $1.3940, but gave up gains after the UK retail sales disappointed big time in December.
• Watch US politics closely for clues on the US Dollar.

Earlier in Asia/Europe

• German PPI rose 0.2% m/m while decelerated to 2.3% y/y in December.
• The Eurozone current account recorded a surplus of €32.5 billion in November.
• The UK retail sales fell 1.5% m/m in December while core retail sales decreased 1.6% m/m at the same time.The UK retailers contributed almost nothing to the GDP growth in fourth quarter.
• Chris Williamson, a chief business economist at IHS Markit, said about the UK retail sales that: "The data add to signs that rising prices and stubbornly weak pay growth continue to erode consumer spending power and will act as a drag on the economy in 2018."