The US dollar is raging forward. This is more than a dead cat bounce, more than a small correction, and is somewhere between a big correction and an outright rally. The dollar is still down on the year against many currencies, but it shows a lot of strength.
Here are three reasons for the fall and updates on 5 pairs, with the individual movers for each currency.:
- Hopes for tax reform: The Trump Administration is expected to reveal more details about their planned tax reform, something that markets really want. This reportedly will include a massive cut of the corporation tax to 20%. In addition, the recent failure of yet another attempt to repeal Obamacare is not seen as a hint to tax reform failure but rather as leaving the full focus on tax reform.
- Still some hawkishness in Yellen’s words: The Fed Chair had mixed messages, casting doubt about inflation. But that already happened in the press conference that followed the rate decision. Her words about “not moving too gradually” were already bullish and continue supporting a rate hike in December.
- OK data: The economic indicators coming out of the US have not been shining, but they are good enough. In addition, some pieces of bad news, such as the drop we had seen in jobless claims, can be blamed on the hurricanes. So, we will need really terrible data to stop the momentum.
- EUR/USD extends its falls. After temporarily holding onto support at 1.1780, the pair collapsed and reached 1.1733. Further support is at 1.1712. The disappointing German elections continue weighing on the pair.
- GBP/USD, which was the darling after the prospects for a rate hike, is down to 1.3370. Quite a fall from grace.
- USD/JPY is extending its rise, as the drums of war with North Korea are fading again, as expected.
- AUD/USD certainly lost the battle against 0.80 and is already down to 0.7830.
- USD/CAD tops 1.24 once again. Resistance is very close, at 1.2410. The loonie cannot capitalize on rising oil prices. Recent Canadian data has been disappointing.