Daily Market Update

Quiet FX Market as Tax Reform Passes the House 

November 17, 2017

The U.S. Dollar is down by over half a percent for the week, per the Bloomberg Dollar Spot Index.

USD

Risk-aversion has also translated into dollar losses and mixed data cut short the momentum the greenback was carrying for weeks prior. Tax reform legislation passed the House of Representatives yesterday in a narrow vote, but it will be up to the Senate to come to consensus and present the bill to the President.

The versions in each chamber are different and with strong partisan divisions, the Republicans will need almost every single party member on board to achieve the landmark law. Stocks may flourish, welcoming the news, but we’ll monitor if there is any consequence to the dollar’s fortune.

Housing Starts improved last month and expanded by 13.7% over the expected 5.6%. The figure certainly helps after seeing contraction in September, which was also revised upward. The good news in the housing sector has yet to aid the buck. We expect a quiet end to today’s session.

 

EUR

The Euro spiked this week mostly as a result of playing a safe-haven role as markets tumbled throughout. Economic data has been consistent in the Euro-zone and there are no signs of concern for the end of the year. However, the situation in Germany is one of gridlock, where Chancellor Angela Merkel is struggling to form an alliance to govern smoothly.

Her worries domestically may seriously damage her ability to lead progress in the Union’s efforts to integrate the bloc further. With nationalist movements gaining popularity within member countries, next year will be one to watch closely for how Merkel and France’s Macron handle challenges to closer unification.

 

GBP

The Pound is surviving through the turmoil of lack of progress in Brexit divorce talks. In fact, the currency picked up almost 1.0% of appreciation for the week. The swings for Sterling will be fairly common as 2017 comes to an end since European Union officials are confused as to how a politically divided UK can agree on anything and bring it to the negotiating table. We remain doubtful on Pound gains and expect reality to hit the currency hard if the year closes without even a final bill amount tentatively agreed to.

 

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