Market Overview

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

Dollar's data inspired rally overnight was brief and weak. The greenback is still set to end as the weakest major currency for the week despite a Fed rate hike. It seems like markets are rather worried on passage of the reconciled tax bill in the Senate. Euro is indeed trading as the second weakest one for the week. Even though ECB raised both growth and inflation forecasts, it's still not going to meet 2% inflation target before 2020. Commodity currencies are trading broadly higher for the week. Canadian Dollar was given a boost by BoC Governor Stephen Poloz's upbeat comment. But it's overwhelmed by Aussie and Kiwi.

Dollar is trying to regain some ground in early US session after ultra-low jobless claims and strong retail sales. Indeed, at the time of writing, the greenback is trading up against all but Aussie for today. Nonetheless, after yesterday's post CPI and FOMC selloff, Dollar has to do more to convince the markets of its momentum. Meanwhile, Euro is actually trading as the strongest one today, trailing Dollar closely. The common currency is lifted by strong Eurozone PMIs. ECB also raised growth and 2019 inflation forecasts in the latest projections. Elsewhere, BoE and SNB stand pat as widely expected.

Dollar tumbled broadly after FOMC rate hike as most likely an extended selloff after core CPI miss. News on the progress in Republican's tax bill provided little support to the Dollar. Technically, Dollar index should have confirmed the rejection from 94.16 resistance. Equivalently, EUR/USD has defended 1.1712 key near term support. more downside is now likely in the greenback in near term with EUR/USD heading back to 1.1960 and possibly have a go at 1.2 handle before year end. Staying in the currency markets, Aussie is propelled higher by a stunning job report. European majors are generally firm too, ahead of SNB, BoE and ECB rate announcement.

Dollar drops broadly today even though Fed raise federal funds rate by 25bps to 1.25% to 1.50% as widely expected. Two known doves, Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans dissented.

Dollar suffers some fresh selling in early US session after weaker than expected inflation data. Headline CPI rose 0.4% mom, 2.2% yoy in November inline with consensus. However, core CPI rose just 0.1% mom, 1.7% yoy , below expectation of 0.2% mom, 1.8% yoy. The greenback will now look into FOMC rate decision and statement for the needed fuel to extend recent rebound. Elsewhere in the currency markets, Sterling is trading as the best performing one today in spite of disappointing job data. Meanwhile Swiss Franc is trading as the weakest one, followed by Euro.