Dollar Grinds Higher in Uncertain Market
The dollar continued to recover over yesterday’s trading day as the currency markets continued to trade in recent ranges despite continued geopolitical concerns remaining at the forefront of most traders minds.
The big mover last night was the Cad which took a significant hit as the Bank of Canada held firm on interest rates and indicated they may be that way for a while and Oil to a knock – down nearly $1.5 a barrel on the day. These two factors combined to see UsdCad up over 150 pips over the course of the days trading.
The US tax reform plan continues to make progress and this is helping to support the dollar with the dollar index hitting fresh weekly highs at 93.65 last night. However, other moves by the administration in Washington look likely to add to market uncertainty with President Trump confirming that the US now recognises Jerusalem as the capital of Israel (and not Tel Aviv) and will be moving it’s embassy there. The one certainty from this move is that it will make President Trump and therefore the US much less popular in the middle east – any other fall out for the markets we will have to wait and see.
Across the pond and Brexit is still front and centre for sterling traders with the issue of the Northern Ireland/Eire border now the last point of contention, the situation is complicated further by PM May’s Tory party being reliant on Northern Ireland’s DUP for it’s majority. However, for us mere FX traders it’s quite simple, any move towards a Brexit agreement should lead to a relief rally in the pound and any further delays or changes of plan should lead to further downside.
Looking ahead to today and we have the Trade Balance data due out in Australia this morning but once again little else out in the rest of Asia or Europe. Into the New York session and the focus will move to the Cad again as we have Building Permits numbers and the Ivey PMI data due. ECB President Draghi is also due to speak later in the day at the ECB in Frankfurt, however it’s presented by the BIS so most traders are expecting little market impact (possibly famous last words?!)
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