The Dollar Continues to Trade Weak

The US dollar continues to remain on the backfoot in early morning trading as the market continues to focus on the Trump administration rather than on the US Fed. The Fed has repeatedly made it clear that it works independent of the government and the economic data that has been coming out of the US in recent times has supported the case for further rate hikes. This should have been positive for the dollar under normal circumstances but we are seeing that the dollar has been under pressure over the last few weeks. One of the main reasons for this is the fact that the market is trying to wait and see how the new administration in the US is panning out. They want to see whether status quo is being maintained by them or whether they are looking to make some drastic changes in terms of trade and foreign policy. Markets prefer certainty and also stability and continuity and if this gets disrupted, then we could see some violent reaction in the markets and with a twitter happy President at the helm, it makes it even more difficult to maintain control and stability and the dollar has been suffering as a result of that.

The dollar has been so weak that it has not been able to make progress even against low yielders like the yen. We see that the USDJPY has been floundering below 113 as of today morning and it does not seem to have any strength to mount a serious comeback and the bounces have been quite shallow as well and have been beaten back down by the bears.

Looking ahead to today, the major news would be the Supreme Court ruling in the UK on the EU membership where it is widely expected that the court would rule that the invocation of Article 50, which begins the Brexit process, would require parliamentary approval. This is likely to delay the whole process but the market might like this decision as it would mean more overall control of the process at the cost of greater time. The pound is expected to be very volatile around this time with a bullish bias and traders are advised to be careful while trading the pound.

 
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