Daily Afternoon Report 19.07.2017
The U.S. dollar was struggling near multi-month lows against a currency basket on Wednesday amid doubts over the future of President Donald Trump’s economic agenda after Republican efforts to overhaul healthcare collapsed.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at little changed 94.47 by 08.49 a.m. ET (12.49 p.m. GMT).
The index touched a low of 94.27 on Tuesday, the lowest trough since August 26, 2016 and is down more than 7% for the year to date.
The dollar fell to postelection lows after Republican lawmakers pulled the plug on the latest version of a contentious bill to replace Obamacare on Tuesday, delivering a major policy blow to the Trump administration.
The failure to deliver on healthcare reform indicated that Trump’s other legislative efforts, such as overhauling the tax code and implementing fiscal stimulus could face difficulties.
Recent weak U.S. inflation data and the prospect that other major central banks may join the Federal Reserve in tightening monetary policy have also fed into weakness in the dollar.
The Bank of Canada raised rates for the first time in seven years last week and officials at the European Central Bank and the Bank of England have indicated that they may tighten policy in the near term.
The ECB is to hold its next policy meeting on Thursday.
The dollar index rallied to 14-year highs in the wake of November’s presidential election fueled by optimism that Trump’s proposed policies would bolster growth and prompt the Fed to speed up the pace of rate hikes, making the dollar more attractive to yield seeking investors.
The dollar showed little reaction following the release of better-than-expected U.S. housing data on Wednesday.
The dollar was weaker against the yen, with USD/JPY shedding 0.35% to trade at 111.70.
The dollar’s losses against the yen were held in check amid expectations that the Bank of Japan will lag behind other central banks in scaling back its massive monetary stimulus program.
The BoJ is to hold its next policy meeting on Thursday.
The euro was a touch lower, with EUR/USD slipping 0.14% to 1.1537, not far from Wednesday’s 14-month highs of 1.1582 as investors remained cautious ahead of the upcoming ECB meeting.
Anticipation has been building ahead of the meeting after ECB President Mario Draghi sent the euro higher with hawkish comments on the euro zone recovery in a speech in Sintra, Portugal late last month.
The remarks appeared to signal a shift towards tapering monetary stimulus, but Draghi also reiterated that any changes to the stimulus program will be “gradual” and “cautious.”
Sterling edged lower against the dollar, with GBP/USD dipping 0.1% to 1.3028.