Dollar Recovers as Momentum Fades

After several sessions of quite aggressive dollar selling we eventually saw some relief for the beleaguered greenback yesterday as the momentum faded from the latest Trump inspired decline. This time last week the dollar index was sitting nicely up around 99.60 and looking poised for a move back through 100.00. We then saw the sacking of the FBI Director, the subsequent uncertainty surrounding the government and more directly the proposed tax reforms which led to the index dropping down to a low around 97.30.

The momentum from this move eventually faded yesterday into the London and New York sessions and we got a move back to the topside in the Dxy and risk trades, the question now is, is just a respite in a much bigger move as the market loses faith in the US governments plans or, was the last week just a blip in the process. Some of the news out of the US suggested that this move may be a bit overextended but only time will tell.

I think the market will now be looking for greater clarity from the Trump administration and probably a renewed plan going forward for it to regain it’s faith in the US economy and until we get that then the dollar will remain on the back foot alongside most risk assets.

Elsewhere the cable did break through the magical 1.3000 barrier after much stronger than expected Retail Sales numbers and then came hurtling back down with a nasty stop loss run in the NY session. Euro drifted back off it’s recent highs and UsdJpy has bounced back up to the cloud.

Looking ahead to today’s sessions and it’s very quiet in terms of fundamental data releases so traders will be focusing on the news wires to see if we get any fresh impetus from Washington or elsewhere. We do have CPI data out in Canada later in the day which will be a focus for the Loonie traders but other than that I think the market will remain news driven.

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