U.S. Dollar Rattled by Political Rumors, Geopolitical Risks, Fed Policy

The U.S. Dollar was all over the map on Thursday as investors continued to react to Wednesday’s dovish Fed minutes as well as concerns over the Trump administration’s ability to push forward its economic agenda. Geopolitical concerns also influenced trader decisions. The market were rattled by an attack in Barcelona and rumors of the possible departure of a key Trump administration official.

The dollar posted a volatile two-sided move during the session, first driven lower by the Fed news from the previous session then driven higher by a sell-off in the Euro because of the dovish tone of its monetary policy meeting minutes.

Prices continued to gyrate in both directions throughout the session as investors continually switched from “risk off” to “risk on” scenarios. The index took out the previous day’s low, but buy the end of the session, it still managed to eke out a small gain.

U.S. Equity Markets

The major U.S. stock indexes fell sharply on Thursday on concerns about President Trump’s ability to run a government and to push through key business-friendly legislation. The Dow Jones Industrial Average dropped 274.14 points, or 1.2 percent, for its biggest drop since May 17.

The selling started early in the session on rumors that Gary Cohn, a business advisor to the president, could resign his role as director of the National Economic Council. This helped create fears that Trump would not be able to pass tax reform, or move forward with his plans to rebuild the country’s infrastructure.

The indexes plunged on the Cohn rumor, but snapped back quickly after the government said he has no plans to resign and the selling was all speculation. The selling eventually resumed in reaction to the attack in Barcelona and the major indexes finished sharply lower for the day.

Gold

Gold prices rose on Thursday, supported by the weaker U.S. Dollar and increased demand for safe-haven assets. The political uncertainty in the United States and the potential terrorist attack in Barcelona also drove investors out of risky assets and into lower-yielding assets like gold.

Crude Oil

U.S. West Texas Intermediate and internationally-favored Brent crude oil rose on Thursday as investors focused on U.S. crude oil stockpiles after the U.S. Energy Information Administration (EIA) suggested oil inventories at the Cushing, Oklahoma hub were declining.

The EIA report showed commercial U.S. crude stocks have fallen by almost 13 percent from their peaks in March to 466.5 million barrels. Stocks are now lower than in 2016. If inventory declines continued at the current pace, U.S. stocks would fall below the five-year average in two months.

Despite the increased pace of the declines, the price action suggests the market is skeptical about the longer-term prospects for rebalancing of the oil market.

Economic News

In the U.S., Weekly Unemployment Claims came in better than expected at 232K. Investors were looking for 240K.

The Philly Fed Manufacturing Index edged higher to 18.9, slightly above the 18.3 forecast, but below the previous 19.5. Capacity Utilization met expectations at 76.7% and Industrial Production was slightly below the estimate and previous read at 0.2%.