Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

USD In The Doldrums As Investors Grow Impatient

Published 24/11/2017, 09:58
Updated 31/08/2022, 17:00

Investors have been waiting for months for a USD rally. Expectations have kept building up as investors expected that the combination of tighter monetary policy; sustained gains in the jobs market; and a tax reform would trigger a dollar rally. Unfortunately, it didn’t unfold as expected.

Despite the fact that Trump’s tax bill passed the House of Representatives quite easily it is far from a done deal, as the bill still has through the Senate next week. There is little doubt the outcome will be very close. The recent broad dollar weakness suggests that investors remain sceptical it will go through easily.

In addition, the latest economic data came on the soft side. October durable goods orders (released on Wednesday) missed expectations. The headline gauge contracted 1.2%m/m compared to +0.3% median forecast. When excluding transportation, the gauge rose 0.4%m/m (0.5% expected); however, the previous month’s reading was upwardly revised to 1.1%. A week earlier, October’s retail sales painted a mixed picture as the effects of the hurricane season is still distorting the data.

Finally, Fed members took their distance and have systematically avoided flooding the media with hawkish/dovish statements about the monetary policy outlook. The Fed already started to reduce its giant balance sheet in October, however, it hasn't had much effect on the long-end of the yield curve. The central bank should also increase borrowing costs in December, which would bring the target band to 1.25%-1.50%.

On Friday, the greenback kept on grinding lower as market participants reacted to positive news from the euro zone and thin trading conditions due to Thanksgiving Holidays in the US. On the long-term, we believe that rising interest rates in the US will help to maintain buying in the dollar, especially against high commodity currencies such as the Aussie and the Kiwi. However, one should remain cautious regarding EUR/USD as the European economic conditions are finally improving. It wouldn’t be surprising to see a further euro gains in the next few months.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.