USD Stays Down with Little Help Coming from Recent U.S. Economic Data

July 21, 2017 (Tempus, Inc.) – The beleaguered U.S. dollar was unable to stage a meaningful comeback overnight after taking heavy losses during yesterday’s sessions.  The dollar has been hampered recently by slowing economic indicators and the failure of the U.S. government to pass any meaningful legislation which casts doubt on the ability to eventually pass pro-dollar initiatives like infrastructure spending or tax reform.

The straw that broke the dollar’s back came yesterday as Bloomberg News broke a story that claimed special prosecutor Robert Mueller has expanded his Russia investigation to include President Trump and his business associate’s business dealings from even before the President had serious political aspirations.   As the story broke, the U.S. Spot Dollar Index fell off a cliff and the greenback sunk to a 2.5 year low against the Euro.

Yesterday’s data was also disappointing with the Philly Fed manufacturing index falling.  There is no major economic data or Fed speakers scheduled for today.  Therefore, the dollar will hope to avoid new Russia headlines and head to the weekend licking its wounds.

EUR

The Euro was a train barreling down the tracks during yesterday’s session despite mostly dovish commentary from ECB President Mario Draghi.  The European Central Bank left interest rates unchanged, which was widely expected.  In a press conference following the decision, the central bank head reiterated that the bank’s easy monetary policy is still appropriate, throwing cold water on speculation that the ECB is close to tightening policy.

Nonetheless, the common currency benefited from breaking Trump/Russia news on the other side of the pond.  The Euro rallied and broke technical levels of the May 2016 high.  The Euro’s run ended with the currency at its strongest level since January 2015 against the U.S. dollar.

AUD

The Australian dollar was one of the only major currencies that failed to rise against the besieged greenback.  Reserve bank of Australia Deputy Guy Debelle said in a speech today that just because an increase in other central bank’s policy rates doesn’t “automatically mean” that rates in Australia need to rise. Aussie OIS show traders are now only pricing in a 20% chance of a rate hike by December of this year, down from 33% yesterday.

The Aussie rallied early in the week after minutes from the RBA’s July meeting suggested growth is picking up.  The currency has since given up some of those gains.


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