The US dollar had a strong start to the week, enjoying a happy Monday. Yet as we discussed, the dollar already had these upbeat Mondays only to end lower on disappointments later in the week.
The US dollar lost the ground it fought to gain and is in retreat across the board. Here are three reasons for the fall:
- Economic data: Housing starts fell to 1.16 and building permits came out at 1.22 million annualized, both below expectations. The back wind that the excellent retail sales report faded away. While these housing figures are not as important, they both went in the wrong direction and softened the ground before the bigger storms.
- FOMC Minutes: The minutes from the Fed decision in July showed that the Fed will likely begin Quantitative Tightening (QT) in September but there was no 100% commitment. The “an upcoming meeting” phrase left the options open. No less importantly, the Fed is somewhat worried about inflation with more members acknowledging reality and casting down.
- Political: The downfall of Donald Trump continues and in an area where markets care. The fallout from Trump’s failure to clearly denounce the terror attack by white supremacists in Charlottesville in an unequivocal manner continues. The dripping out of CEOs from the president’s councils turned into an avalanche as the members of one group organized a conference call and decided to disband. Trump was quick to say that he fired them and went on to disband another council. The result is that businesses now have less influence on the administration. And in general, the hopes for meaningful tax reforms and infrastructure spending seem diminished. Trump is already in deep trouble on the Russia investigation. Here is a guide to trading a potential impeachment.
EUR/USD is back to challenging the 1.18 level, USD/JPY is under 110 and even the beaten pound found its legs and trades above 1.29.
Will this continue? We later have jobless claims, industrial output the Philly Fed manufacturing index from the US.
More: What does a successful trader do every morning before the markets open?
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