The U.S dollar is trading on its back foot somewhat to open Friday’s trading. The currency is nearly 1.0% weaker from its high against the Euro on Wednesday but mostly unchanged on the week. General risk sentiment and political uncertainty abroad has kept the greenback in relatively tight ranges this week. The exception would be the Mexican peso, which as rallied 3.7% from last Friday’s close after the Mexican central bank announced measures to bolster the currency.
At 10 a.m., new home sales are expected to have risen 6.4% in January, up from a dismal contraction of 10.4% in January. The University of Michigan consumer confidence number is also expected out this morning but is unlikely to fundamentally change the direction of the greenback.
Traders continue to keep an eye on the “Trump effect” on the U.S. dollar. President Trump will give his first address to Congress next Tuesday. We will be looking for hints on his tax plan and any mention of the dollar being “too strong.” In addition, new U.S. Treasury Secretary Steve Mnuchin said that the administration will assess whether China should be labeled a currency manipulator. “Assessing” is a far cry from the Trump’s campaign promise to label China a currency manipulator “on day one.”
Mnuchin also stated that the administration was committed to announcing a significant tax reform package by August. Repealing restrictions on banks and cutting corporate tax rates is the main driver behind the surge in U.S. equities.
The Aussie and New Zealand dollars were unable to take advantage of general dollar weakness. The Australian dollar dropped half a percent against the U.S. dollar on speculation the Reserve Bank of Australia may but rates. However, Reserve Bank of Australia Governor Philip Lowe said it is hard to say the Australian dollar is fundamentally overvalued but continued “it would be better if it were lower still.”
The Euro’s fate continues to be tightly tied to the outlook of the French presidential elections. The Euro has found some minor reprieve over the last two sessions as opinion polls suggest centrist candidate Macron has found extra support from his election pact with leftist Bayrou. However, investors are wary that far-right candidate Le Pen can pull off an upset which would drive the currency lower.
There was limited fundamental data released in the Eurozone today. French consumer confidence was flat in February from January. Industrial orders rose 2.8% in December. However, year over year, orders fell 0.9%.