Housing data out of the US and Canadian inflation numbers did manage to attract some attention during today’s trading though the tone for the day was set earlier with developments on the US political front – most notably a potential connection between the Trump campaign and Russia and progress on the tax story – getting the bulk of today’s focus.
At 1525 GMT, the dollar index, which gauges the greenback against a basket of currencies, was 0.2% down on the day at 93.78. On the week, it is lower by 0.7% and is on track to record its second straight weekly decline. The latest political twist after a report on the Wall Street Journal stated that Special Counsel Robert Mueller’s team issued a subpoena last month demanding documents that could potentially link Trump’s campaign officials with Russia, put the dollar on a negative footing during today’s trading.
Dollar/yen traded 0.5% down on the day, hitting 112.32 at one point, its lowest since October 19. The pair was last traded not far above the aforementioned low. Euro/dollar was 0.2% higher, eyeing the 1.18 handle. Pound/dollar was up on the margin and within breathing distance of the 1.32 mark.
The US House of Representatives yesterday voted in favor of a tax-cut package. Attention would now shift to the Senate, where Republicans hold a slimmer 52-48 majority and thus cannot afford to lose more than two within their ranks in an upcoming vote as Democrats are unified in opposing the passage of the relevant tax legislation. Ron Johnson, one of the two Republicans senators that criticized the tax plan said he is optimistic his concerns can be dealt with. It should also be mentioned though, that according to a Time magazine report, four Republican senators have privately made talk about opposing the bill as they have concerns about the rise in the federal deficit it would cause. More developments on the tax front are expected after Thursday’s Thanksgiving holiday.
US housing starts grew by 13.7% m/m in October to stand at 1.29 million units, their highest since October of last year. The increase considerably outstripped expectations for a rise by 5.6% as well as the previous month’s downwardly revised decline by 3.2%. Building permits for the same month increased by 5.9%, above expectations for a rise by 2.0% and September’s fall by 4.5%. It should be mentioned that disruptions by recent hurricanes negatively affected the figures in the previous month and boosted them in October as US citizens started replacing their damaged-from-flooding properties. The dollar index did manage to recover part of its earlier losses following the releases, though the US currency’s gains relative to majors were limited for the most part. Also, the gains were not sustained as trading progressed.
Canadian inflation data for October showed the pace of headline inflation slowing relative to the preceding month. Month-on-month, CPI grew by 0.1% and year-on-year by 1.4%, matching expectations. These compare to September’s respective figures of 0.2% and 1.6%. The Bank of Canada target for annual inflation is 2%. The deceleration was attributed to weakening energy prices and clothing costs. Core inflation though posted a slight acceleration relative to September. The BoC’s measures of inflation gave a mixed picture: CPI common grew by 1.6% y/y (1.5% in September), CPI median expanded by 1.7% y/y (1.8% in September) and trimmed CPI stood at the same figure as September’s (1.5%).
The Canadian dollar lost ground relative to its US counterpart as the data went public as forex market participants scaled down their expectations for another rate hike to be delivered soon by the BoC. Dollar/loonie last stood 0.5% higher on the day at 1.2811. At its highest it touched a two-week high of 1.2823. Also related to Canada, NAFTA talks will be held today in Mexico, carrying through to Tuesday.
On the Brexit bill front, UK Prime Minister Theresa May today said that Britain will honor its financial commitments to the EU. The issue is considered as one of the major impediments for progress in negotiations. However, once again no clarity was given on the exact amount. Euro/pound traded 0.1% up on the day, at 0.8926.
In emerging markets, dollar/rand was 0.6% lower at 14.0558 ahead of next week’s (November 24) South African credit ratings reviews by agencies Standard & Poor’s and Moody’s. At its lowest, the pair fell below the 14 mark, recording a 15-day low.
Gold traded 0.5% higher at $1,285.11 per ounce, benefitting from weakness in the dollar. WTI and Brent crude were up by 1.7% and 1.2% respectively, at $56.10 and $62.07 per barrel respectively.
