Market Overview

The forex markets are trading rather mixed ahead of FOMC minutes. Commodity currencies overtake Europeans as the main driver today, with Aussie and Loonie trading generally higher. Sterling dips on weaker than expected data but remains the second strongest for the week. Dollar is also trying to stage a rebound but stays in red for the week, except versus Swiss Franc. Strength in Dollar's rebound is rather unconvincing. Traders are relatively more active back from holiday. But would likely need more inspirations from today's ISM and Friday's NFP.

Dollar is trying to recover in Asian session today after the steep new year selloff. Nonetheless, the greenback remains the second weakest one for the week, just next to Kiwi. S&P 500 and NASDAQ closed at records high at 26951.81 and 7006.90 overnight. DOW also gained 104.79 pts or 0.42% to 24824.01. 10 year yield staged a strong rebound by gaining 0.06 to 2.465 but that was mainly driven by surge in European yields, including Germany and UK. In other markets, gold breached 1320 handle before retreating mildly today. WTI crude oil is also holding above 60 handle.

Dollar's broad based selloff continues as 2018 starts. In particular, EUR/USD reaches as high as 1.2080 and is set to take on 1.2091 key resistance. USD/JPY is holding above 112.02 support for the moment, but it looks vulnerable. Among the currencies, Euro is so far trading as the strongest one, followed by Sterling. But Swiss Franc clearly lags behind its European rivals.

The forex markets start rather slowly today as, without any news, traders are staying in holiday mood. Trading could remain subdued today as UK manufacturing PMI is seen as the only market moving event. Nonetheless, US events will take lead later in the week with FOMC minutes, ISM indices and non-farm payrolls featured. Dollar was under tremendous pressure by the end of last year, partly thanks to surging commodity prices. The greenback will need some strong data to give it a life. Otherwise, Dollar index would have a take on 91 key support level within January.

Dollar remains generally weak as 2017 is coming to a close. It has been a rather bad year for the greenback despite Fed's rate hike. The highly anticipated tax plan of the Republicans also provided little boost to the greenback. Dollar index's yearly high was made back in January at 103.82. It then dropped to as low as 91.01 in September before finally staging a rather weak recovery. The sharp fall in December would very likely put 91 hand back into in the coming January. And we could see more downside in the greenback, at least in near term, before seeing a sustainable rebound.

Dollar stays weak in early US session as economic data provide little inspiration. Initial jobless claims were unchanged at 245k in the week ended December 23, above expectation of 241k. Four week moving average rose 1.75k to 237.75k. Continuing claims rose 7k to 1.94m in the week ended December 14. Wholesales sales rose 0.7% in November. Trade deficit widened to USD -69.7b in November. With the broad-based selloff in Dollar, EUR/USD should now be heading for a test on 1.1960 resistance.

Dollar's selloff accelerates overnight on sharp selloff in treasury yields and stays weak in Asian session. 10 year yield lost -0.053 to close at 2.414, well below last week's high at 2.499. Worse than expected consumer confidence reading was seen as a factor. Conference board consumer confidence dropped to 122.1 in December versus consensus of 128.2. Year end reposition was seen as another factor in the movements in bonds. But probably, the continuous flattening of yield curve is worsening before year end as markets are not to optimistic with the Republican's tax plan.

Commodity currencies continue to shine today with help of surge in copper prices. Aussie is so far the biggest winner, while Canadian Dollar is also strong. Sterling also gained in post-holiday trading on optimism of smoother Brexit negotiations ahead in 2018. While Dollar is weak, Swiss Franc and Yen are even weaker as markets are back in risk seeking mode.

The financial markets are treading water in quiet holiday trading. DOW closed -0.03% down at 24746.21 overnight. S&P 500 closed down -0.11% at 2680.50. Nikkei is also trading up around 0.1% at the time of writing. In the currency markets, Aussie is the clear winner for the week while Yen is broadly lower. The markets may need to wait for consumer confidence from US to give it back its life.

Dollar shows little reaction to mixed economic data released from the US. Personal income rose 0.3% in November, below expectation of 0.4%. Spending rose 0.6%, above expectation of 0.5%. Inflation data are positive. Headline PCE accelerated to 1.8% yoy, up from 1.6%, in line with consensus. Core PCE accelerated to 1.5% yoy, up from 1.4% yoy, meeting expectation of 1.5% yoy. However, durable goods orders disappoint. Headline durable goods orders rose 1.3% in November, below expectation of 2.2%. Ex-transport orders dropped -0.1%, below expectation of 0.5% rise. The greenback continues to trade as the third weakest one for the week, just next to Yen and Swiss Franc.

Canadian Dollar remains generally firm today but it's overwhelmed by Aussie on commodity prices. Meanwhile, Euro trades mildly lower as results of the Catalonia regional election provide no resolution to the political crisis. Dollar again attempts to recover today but it's trading in red against all others expect Yen for the week. The greenback will need some solid PCE inflation data if it's going to have a sustainable rally.

Canadian Dollar soars in early US session after impressive economic data. Head line retail sale rose 1.5% mom in October versus expectation of 0.3% mom. Ex-auto sales rose 0.8% mom versus expectation of 0.4% mom. Inflation data also came in generally stronger than expected. Headline CPI accelerated to 2.1% yoy, up from 1.4% yoy and beat expectation of 2.0% yoy. CPI core median rose to 1.9% yoy, up from 1.7% yoy and beat expectation of 1.7% yoy. CPI core trim rose to 1.8% yoy, up from 1.5% yoy, beat expectation of 1.5% yoy. Nonetheless, CPI core common slowed to 1.5% yoy, down from 1.6% yoy and missed expectation of 1.7% yoy. The set of data adds to the case for BoC to raise interest rate again in Q1. USD/CAD dipped to as low as 1.2719, comparing to this week's high at 1.2919.

US tax plan has now only one more stepto take, President Donald Trump's signature, and it will become law. Market's reactions were relatively muted yesterday after House and Senate approvals. DOW closed slightly down by -0.11% at 24726.65. S&P 500 lost -0.08% to end at 2679.25. In the currency markets, Dollar trades mildly higher today, but remains the second weakest for the week. Yen is the worst performing one as pressured by powerful rally in treasury yields. BoJ's standing pat provides little inspiration to the Japanese currency. Meanwhile, Euro remains the strongest one for the week, followed by Swiss Franc.

Yen continues to trade as the weakest one as German yield rises for another day. At the time of writing, 10 year bund yield rose another 3 pts to 0.41%. USD/JPY rises on that and and breaks 113 handle. But the greenback is seen soft elsewhere. Developments regarding the tax plan were positive. Senate finally voted 51-48 to pass the bill. House passed the bill yesterday with 227-203 votes. But due to technical glitches, House will have to re-do it again today. But that should just be procedural. Elsewhere, Sterling is trading rather firm today despite growth forecast downgrade by IMF.

Euro is trading as the strongest currency this week as boosted by a surge in German yields. Meanwhile, Dollar is holding a soft tone after House passed the tax bill and then came back with a hiccup. Nonetheless, the Chambers will probably pass the unified version on Wednesday, giving it enough time for President Donald Trump to sign it before Christmas. Elsewhere in the currency markets, Kiwi tumbles broadly today after much worse than expected trade deficit. Yen followed closely as pressured by surging global yields.

Dollar continues to trade generally soft, except versus Yen and Sterling. While tax bill optimism boosted stocks to record high, the greenback's reaction remains indifferent. The House will vote on the tax bill today and will very likely pass it. Senate is expected to follow shortly after scheduled debate. Released from US, housing starts rose 3.3% mom to 1.297m annualized rate in November. Building permits also rose 1.4% mom to 1.298m annualized rate. Both came in above market expectation. Current account deficit narrowed to USD -101b in Q3.

While the it looks like Dollar couldn't care less, global equities seem to be responding very well to the developments on the US tax plan. House and Senate Republicans are expected to pass the final bill mid-week. And the bill could then be on President Donald Trump's desk before Christmas. Nikkei closed up 1.55% at 22901.77 earlier today. European indices follow and gains broadly. In particular, DAX is up 1.6% at the time of writing while CAC 40 is up 1.2%. In the currency markets, major pairs and crosses are generally stuck in range with exception in weakness in Canadian Dollar. Euro is trading broadly higher with Nov Eurozone CPI finalized at 1.5% yoy.

Markets are rather quiet as they start the pre-holiday week. Dollar attempts to rally on news of the tax bill, but there is little momentum seen. Yen trade broadly softer despite positive trade data. Weakness in Swiss Franc and Yen suggest that markets are in mild risk seeking mode. Aussie and Kiwi are generally firmer, followed by Euro. But overall, the forex markets are generally staying in Friday's range, without a clear direction.

After some roller-coaster rides during the week, Dollar staged a broad based come back before the weekly close. The Republicans' tax plan is now back on track for being signed off by US President Donald Trump, by the end of the year, probably even before Christmas. There were various factors sank the greenback. Tamer than expected core CPI reading was one. An additional dissenter in Fed's rate hike was another. But looking back, the uncertainty on whether Senate could get the bill passed was probably the biggest weight on Dollar. It's still early to tell but focus will now be on whether Dollar could stage a sustainable turnaround before year end.

Dollar stays broadly weak today as Republicans' tax plan is entering the final stage with some political jitters. Nonetheless, the Pound is overtaking Dollar is the weakest one. News that Brexit negotiation is formally entering the next phase provides little support to Sterling. Euro recovers today on news that German SPD is willing to formally start coalition talk with Angela Merkel's CDU/CSU. But the common currency will still likely end as the third weakest as markets took ECB announce negatively. Commodity currencies are set to end the week as the strongest ones