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Is the Dollar Ready for a Tumble?

By:
Bob Mason
Published: Aug 18, 2017, 07:34 UTC

One does have to wonder whether the next 3 plus years are going to be anything like the last 8 months, with the U.S administration seemingly more capable

Forex Snapshot

One does have to wonder whether the next 3 plus years are going to be anything like the last 8 months, with the U.S administration seemingly more capable of dictating the direction of the Dollar than the FED.

Economic data out of the U.S this week hasn’t been too bad, with the weekly jobless claims figures out yesterday having been Dollar positive, while industrial production and manufacturing activity softened in Philly.

The markets should be getting to the point where there is less sensitivity to noise from Capitol Hill, but judging by the moves in the Dollar this week, the Trump era has certainly yet to be completely priced out and there may be more to come for the Dollar and the markets as the investigations develop and Trump continues to chop and change members of the administration, not to mention speak. At the end of the day, there has been very little delivered by the administration for there to be any concerns over who comes and goes. Perhaps it should be Dollar positive for the existing members of the administration to be replaced by new…

Its food for thought and when considering how little time has passed since Trump’s inauguration, one does need to ponder on how things will be in even a year from now. It’s hard to recall a U.S administration having such a damming impact on the Dollar, but they wanted a weaker Dollar and they got it.

On the macroeconomic data front, it’s a much quieter day, with stats out of the U.S limited to prelim August consumer sentiment figures, which are forecasted to be Dollar positive. The survey will have been completed after Trump’s latest failings over Charlottesville and the mass walk out of CEOs this week from his two business councils. So it could well be downhill after this, though looking at how consumer confidence has fared through the year, it’s been pretty resilient despite the administration failing to deliver on growth policies pledged during and after the Presidential Election campaign.

Perhaps of more interest will be how the EUR performs in the coming days, having slumped back to sub-$1.17 levels before a partial recovery. The ECB has certainly done a stellar job in pegging the EUR back from $1.19 levels, but with the economic outlook for the Eurozone on a more positive footing than that of the U.S and with geo-political risk having abated in the Eurozone, in stark contrast to the U.S, it’s hard to imagine the EUR easing any further.

There’s very little else for the markets to deal with through the day, so on merit, it would be the Dollar that should be on the weaker footing at the end of the week.

At the time of the report, the Dollar Spot Index was down 0.19% at 93.442, with both the EUR and the Pound on the bounce, gaining 0.26% and 0.21% respectively. It is a reflection of just how bad market sentiment is towards the U.S administration that even the Pound is able to make ground, despite a weakening economy and the uncertainty over Brexit and what looms.

While we do expect the Dollar to remain under pressure, there will also be some support, particularly when considering current levels, though it’s anyone’s guess what comes next from the Oval Office.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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