The U.S. dollar has started the last week of the month on its back foot, following losses across the board last week.
The Bloomberg Dollar Index had its worse week in two months last week and it’s nearly 2.0% lower in the month of November.
The greenback faces political risks this week as Senate Republicans are attempting to pass their version of the tax reform bill by Thursday, which is no small feat. If the Senate passes their bill, it will need to be reconciled with the House version. Currently the two versions have large differences and bridging the divide will be a long leap. The GOP is hoping to have a tax reform bill on the President’s desk for his signature by the end of the year.
As always, data will play a role in the direction of the greenback. New Homes sales will be released today, followed by consumer confidence on Tuesday. The second reading of third quarter gross domestic product will cross the wires on Wednesday morning which is expected to show the economy hummed along at a 3.2% clip. ISM manufacturing will round out the week on Friday.
The Euro traded up to a fresh two-month high against the U.S. dollar overnight, continuing its momentum from last week. The common currency is now nearly 1.5% higher than the beginning of last week on the back of strong German data and general dollar weakness.
The Euro found some renewed strength today on speculation that Conservative German Chancellor Angela Merkel will be able to form a coalition government with the Social Democrats. However, these talks could take weeks which could eventually weigh on the common currency.
This will be a slow week for Eurozone data but inflation prints on Thursday could move markets. In the near-term expect the EUR/USD to take its cues from developments on Capitol Hill surrounding the tax reform bill.
The British was mostly flat against the Euro and U.S. dollar overnight, but a number of risk events are slated for this week and could negatively affect the currency. Bank of England’s Chief Economist Andy Haldane will speak later today and may address the Bank’s inflation outlook. Tomorrow, the Bank of England will release its stress test results. Throughout the week, embattled Prime Minister Theresa May will attempt to find a solution to the Northern Ireland border dispute, another unintended consequence of the Brexit vote.