Dollar Finishes Week Lower, But Firms on Tax Reform Talk

The U.S. Dollar finished lower against a basket of currencies last week as investors reacted to a number of external factors that overrode fresh domestic news. The dollar index, which fell to its lowest level since late March, was primarily influenced by a rise in the Sterling, which hit a 6-month high and worries about the French election and North Korea.

 

June U.S. Dollar index futures finished the week at 99.880, down 0.583 or -0.58%.

The greenback bounced back from its lows late in the week after U.S. Treasury Secretary Mnuchin said the Trump Administration is close to bringing forward “major tax reform.” On Friday, President Donald Trump promised to make an announcement about much anticipated tax reform next week, but it was not immediately clear how much he would reveal or what form it would take.

“We’ll be having a big announcement on Wednesday having to do with tax reform. The process has begun long ago but it really formally begins on Wednesday,” Trump said at the Treasury Department on Friday.

British Pound

The British Pound surged to its highest level in six months last week on the news that the country will hold an election that’s likely to strengthen the government’s mandate in its Brexit talks.

The GBP/USD finished the week at 1.2801, up 0.0280 or +2.23%.

The price action suggests investors believe Prime Minister Theresa May will win a comfortable enough majority in the House of Commons. The news took investors by surprise. It also served as a pre-emptive strike against fringe members of their own party who want Britain to break away from the European Union abruptly and forcefully.

Australian Dollar

The Australian Dollar weakened last week and failed to gain traction even with the weaker U.S. Dollar and increased demand for higher risk assets.

The AUD/USD closed at .7543, down 0.0033 or -0.44%.

The Aussie was under pressure last week as investors reacted to the minutes of the Reserve Bank of Australia’s (RBA) April meeting which showed members discussed increased risks in the property market as well as employment figures that continue to disappoint.

The central bank sounded unexpectedly dovish which suggests the central bank is likely to maintain its neutral stance on interest rates. The minutes also suggested concerns about the inflation outlook are rising.

New Zealand Dollar

The New Zealand Dollar rose against the U.S. Dollar last week as investors reacted to stronger dairy prices and a sharp rise in consumer inflation.

The NZD/USD settled the week at .7027, up 0.0031 or +0.44%.

The Kiwi rose after the government reported consumer prices rose at their fastest annual pace in five-and-a-half years in the first quarter of 2017, marking the first time inflation has hit the mid-point of the central bank’s 1 percent-to-3 percent target range since September 2011.

The consumer price index rose 1 percent in the three months to March 31 for an annual pace of 2.2 percent.

In other news, prices in the latest Global Dairy Trade (GDT) auction, the eighth sale of calendar 2017, rose 3.1 percent following a 1.7 percent gain previously and this was the third successive gain.