Strong Euro Pressures U.S. Dollar Index

The U.S. Dollar closed mixed against a basket of major currencies on Wednesday, gaining ground on the Japanese Yen, but declining against the Euro. March U.S. Dollar Index futures posted a 0.15% loss on Wednesday due to the heavy weighting of the Euro in the index.

The USD/JPY moved higher, supported by a rise in U.S. Treasury yields. The Dollar/Yen was helped by the widening of the spread between U.S. Government Bonds and Japanese Government Bonds. The EUR/USD was boosted by a rise in German bond yields.

U.S. Economic News

The Republican-led U.S. House of Representatives gave final approval on Wednesday to the biggest overhaul of the U.S. tax code in 30 years, sending a sweeping $1.5 trillion bill to President Donald Trump for his signature.

In other news, U.S. Existing Home Sales increased more than expected in November, hitting their highest level in nearly 11 years, the latest indication that housing was regaining momentum after almost stalling this year.

According to the National Association of Realtors, existing home sales surged 5.6 percent to a seasonally adjusted annual rate of 5.81 million units last month amid continued recovery in areas in the South ravaged by Hurricanes Harvey and Irma. That was the highest level since December 2006 and followed an upwardly revised 5.50 million-unit pace in October. Traders were looking for an increase of 0.9 percent to a 5.52 million-unit rate in November from a previously reported 5.48 million-unit pace in October.

Gold

Gold prices rose to a two-week high on Wednesday while posting its fourth straight session of gains. A weaker U.S. Dollar was a catalyst behind gold’s rally. The Greenback rose initially, following solid home sales, but a drop in mortgage applications drove the dollar to a two-week low, triggering a change in trend to down.

Gold reached a cyclical bottom on December 12 after the U.S. Federal Reserve failed to increase the number of interest rate hikes in 2018 in its last monetary policy statement. It was further supported by a weaker U.S. Dollar and increased demand from China.

Crude Oil

U.S. West Texas Intermediate and international-favored Brent crude oil futures rose on Wednesday, supported by a bullish weekly government inventories report and the continued shutdown of the North Sea Forties pipeline system.

According to the U.S. Energy Information Administration, U.S. crude oil stocks fell by 6.5 million barrels, more than expected, in the week to December 15, while gasoline stocks rose 1.2 million barrels, less than anticipated, even though refining activity rose.

U.S. Equity Markets

The three major U.S. stock indexes closed lower on Wednesday as the euphoria from the passing of the tax reform bill succumbed to pre-holiday profit-taking. A jump in Treasury yields also took some momentum off the stock market. The 10-year U.S. yield hit 2.5 percent, its highest level since March 20, while the two-year yield rose to its highest level since October 2008.