Daily Market Update

Dollar Index New Three Month High

October 23, 2017

The U.S. dollar pushed slightly higher overnight, building on last week’s gains. The Bloomberg Dollar Spot Index is now near its strongest level in three months.

USD

The U.S. dollar pushed slightly higher overnight, building on last week’s gains. The Bloomberg Dollar Spot Index is now near its strongest level in three months. The greenback found support last week after the Senate adopted a budget, making it slightly easier for the GOP to push through tax reform which is widely expected to be dollar positive.

There is no major economic data slated for release today so we keep an eye on developments abroad and any news on who will be the next chairman of the U.S. Fed. Current Chair Janet Yellen interviewed with President Trump on Thursday. The President said “I really like her a lot,” but markets are expecting Trump to pick either Jerome Powell or “bull” John Taylor. Picking the former would likely cause the dollar to rally on the presumption of more interest rate hikes in 2018.

The economic docket gets busier as the week progresses. Durable goods and new home sales are the highlights on Wednesday followed by pending home sales on Thursday. Advanced third quarter gross domestic product will be released on Friday morning and represents this week’s largest risk event.

 

JPY

The Japanese yen fell to its weakest level in three months versus the U.S. dollar after Prime Minister Shinzo Abe’s snap election paid off in spades. It was widely expected that Abe would hold on to his position as Prime Minister, but his two-thirds majority was in jeopardy. However, Abe earned a landslide victory which sent Japanese stocks soaring as unprecedented quantitative easing and low-interest rates are now assured for the foreseeable future.

 

CAD

The Canadian dollar was mostly unchanged overnight but remains near a two-month low versus its American rival. The “loonie” fell drastically late last week after retail sales disappointed investors. Odds of a Bank of Canada interest rate hike later this week dropped like a stone and are currently under 20%. However, odds of a rate hike before the end of the year are just under 50%.

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