Dollar Tumbles on Trump Uncertainty

22 March, 2017

USD plunged on Tuesday breaking the significant support line at 100.00 and further testing the next major support at 99.50. The downtrend was held temporarily above that level.

Last week the dollar index fell by 1.3%, marking the worst weekly performance in the past 8 months. Regardless of the rebound in February, the dollar index has retraced approximately 2.1% since the beginning of this year because of profit-taking pressure post the US presidential election surge.

Recently, several investment banks have turned their USD outlook from bullish to bearish, and cut their USD long positions. Market concerns over the uncertainty arising from the Trump administration also pose downside risk on USD. Additionally, the ECB’s recent hawkish tone also weighing on USD.

The price range between 99.00 – 99.50 of the dollar index is likely to provide a stronger support. However, if this zone is broken, we will likely see a further USD sell-off.

On Tuesday, New York Fed President William Dudley (a FOMC permanent voting member) stated that “bank culture needs to be improved”. However, he did not comment on the future prospective of rate hikes.

This comment was followed by Kansas Fed President Esther George (a non-voting member) stated that “it is a critical time for the Fed to remove some of monetary stimulus to prevent the economy from overheating”. However, the Fed needs to be cautious on tightening. She also made no comment on future prospective rate hikes.

UK inflation data for February was released on Tuesday March 21st. UK CPI rose to 2.3%, with core CPI rising to 2.0%, for the first time surpassing the central bank’s 2% target since January and July 2014 respectively. UK inflation has been mainly lifted by weak GBP and the rising cost of fuel.

GBPUSD rallied more than 70 points after the release of the data testing the next significant resistance level at 1.2500. GBP has seen its longest bullish streak since January helped by the increased market expectations on a prospective rate hike led by the recent events: BoE’s MPC member Forbes voted for a rate hike in March, and the above 2% inflation readings. However, weak wage growth is one of the BoE’s major concerns over rate hike.

The UK still needs to face 2-years of political uncertainty before the final Brexit deal is made with the EU. Bank of England President Carney commented that “markets shouldn’t overact on one month’s data”. It will take an extended period for the markets to have a broader scope for the UK economy performance during Brexit negotiation.


Source link  
New Chinese stimulus promises

China continues to struggle for economic growth, as it aims to resist the effect of trade disputes with the U.S. The editor of an influential...

Best currency rally heading for a crash

The analyst who most accurately predicted the ruble's rally in the second quarter is now its most pessimistic forecaster. The Bank of Russia's switch to...

Trade truce 2.0, or new currency wars?

Tensions around trade wars subsided following news reports that both the US and China leaders are set to hold an extended meeting...


Experts predict where crude could go

A top military aide to Iran's supreme leader warned over the weekend that The first bullet fired in the Persian Gulf will push oil prices above...

Morgan Stanley sees global recession

Investors are overlooking the threat posed by the U.S.-China trade war, which could send the global economy into recession in less than a year...

Oil at $100: how will it affect economy?

Brent crude has risen about 33 percent this year and is close to the highest in six months. While higher prices due to strong demand typically reflects...


Oil sector will lose 95% by 2050

Companies in the oil and gas sector, including large groups such as Shell, BP and Exxon, could lose 95% of their value by 2050 if governments...

The US economy recession by 2021

In a recent survey, most business economists believe the U.S. will fall into recession by 2021. Days after the market euphoria over a ceasefire in the...

Fed plans some further hikes

The U.S. Federal Reserve raised interest rates on Wednesday, as expected, but forecast fewer rate hikes next year and signaled its tightening cycle is nearing...

  


Share it on:   or