With US new home sales being the day’s major release during today’s session, upcoming developments, such as US tax reform deliberations and Brexit negotiations, were in forex market participants’ minds during today’s European session. Meanwhile, the yen was advancing on some softness in Asian and European equity markets.
At 1523 GMT, the dollar index, which measures the greenback against the currencies of six major US trading partners, was 0.1% down at 92.74. The gauge finished lower in the three preceding weeks, while today it touched a three-month low of 92.50. The US currency was deeper in losses earlier in the day but managed to reverse some of its losses later in the session.
Jerome Powell, President Trump’s nominee to lead the Fed once Janet Yellen’s term expires in February, will be having his confirmation hearing in Washington on Tuesday (1500 GMT) with senators having the opportunity to question him on key issues. Any comments on monetary policy, deregulation and the economy overall have the capacity to act as market movers.
The US Senate will be resuming deliberations on tax reform this week following last week’s Thanksgiving break. Donald Trump is scheduled to meet Senate Republicans on Tuesday to discuss continuing efforts to pass the tax plan legislation. Developments on this front are also likely to act as catalysts for dollar positioning.
In today’s main release, October new home sales rose by 6.2% m/m to reach 685k units, contrasting expectations for a decline by 6.0% after September’s surge by 14.2% (downwardly revised from 18.9%). Sales in October constitute a decade high as well as the third straight monthly increase and reflect strong demand across the US. The dollar managed to erase some of its losses relative to major rivals following the release at 1500 GMT.
Dollar/yen was last 0.3% lower, trading above the 111 mark, a level violated on the downside earlier in the day as the pair hit a two-month low of 110.87. Euro/dollar was flat after advancing in the three preceding days. At its highest, it recorded a two-month peak of 1.1960. Upbeat data in recent days and political uncertainty withering out in Germany on the back of rising prospects for a coalition between Social Democrats and Merkel’s Christian Democrats, have been supportive of a stronger euro.
Eurozone’s common currency was losing ground relative to the yen during today’s trading though. Euro/yen was 0.4% down at 132.63. Still, the pair held most of the gains from Friday’s advance, a day on which it rose by 1.1%. The yen’s capacity as a funding currency appears to have supported it today as there was a pullback of some sorts in non-US equity markets. Pound/yen was also lower (by 0.2%) at 148.42.
Sterling was last stronger versus both the dollar and the euro despite the Irish border issue – a key consideration in Brexit negotiations – getting more complicated ahead of political uncertainty in Ireland, with elections potentially being put on the table for December; this will become clearer by tomorrow. Pound/dollar was 0.1% up after tracking a two-month high of 1.3382 earlier in the day. Euro/pound was 0.1% lower at 0.8935 after previously rising to an 11-day high of 0.8966.
UK PM Theresa May was given a deadline up to December 4 by EU counterparts to improve its position on key pending Brexit issues in order for leaders from the bloc to approve the commencement of talks on trade relations during the summit scheduled for December 14-15.
Dollar/loonie was 0.1% higher at 1.2726, reversing earlier losses. Meanwhile, the aussie was flat relative to the greenback at $0.7611 and the kiwi was up by 0.5% versus its US counterpart at $0.6913. At their highest, they both touched two-week peaks versus the greenback.
In notable movements within the emerging markets spectrum, the South Africa rand was making up on some of its losses from previous days relative to the dollar after credit rating agency Moody’s decided to place South Africa on review for a downgrade rather than proceed with an outright credit cut as was the case with Standard & Poor’s which now rates the nation’s credit ability within the "junk" category. There is some relief in the markets, as should Moody’s had gone ahead with a downgrade, then South African bonds would had been removed from numerous key global bond indexes. Dollar/rand was last 0.9% down at 13.7435.
In commodities, gold was 0.5% up at $1,294.40 per ounce. Its highest on the day, which also constituted a more than one-month peak, was $1,299.13. The precious metal is on a positive footing on the back of dollar weakness, but it also benefitted on cautiousness in stock markets during today’s trading. WTI and Brent crude traded lower by 2.15% and 1.1%, at $57.68 and $63.26 a barrel respectively. Despite the sell-off, both benchmarks remained relatively close to recently-hit more than two-year high levels.
