Health Care Uncertainty Holding Dollar Hostage

USD

The U.S. dollar failed to trade with any conviction yesterday and overnight as the House of Representatives pushed back a vote to “repeal and replace” Obama care until today. Traders across all markets are anxiously awaiting the result of a vote and the delay has had a negative effect on equity markets. President Trump and Speaker Paul Ryan failed to strike a deal with the more conservative “House Freedom Caucus” yesterday. Trump and Ryan are trying to appease the right, without endangering the votes of more moderate Republicans. House Majority Leader Kevin McCarthy told Fox News that after a few procedural moves, the House will likely vote on the bill sometime in the mid-to late afternoon. Until then, we expect the greenback to muddle through recent ranges.

This morning’s economic data has taken a back-seat to the political risks on Capitol Hill. Durable Goods orders were a mixed bag and failed to move the greenback. The headline print rose to 1.7%, beating expectations of a 1.4% gain. However, the core reading that excludes volatile transportation purchases underwhelmed.

 

EUR 

The Euro returned to recent highs overnight against the U.S. dollar following better-than-expected PMI data out of the Eurozone. Eurozone PMI, overall, surged to its highest level in six years. German PMI jumped to 58.5, beating estimates of 56.2. French PMI also bested expectations, rising to 58.3 v. an expected 56.6. The Euro will continue to be held back by political storm cloud looming over the French elections, but Euro could see a more significant pop if populist candidates fail to win elections in France and Germany.

 

GBP 

The British pound has taken a breather from its recent surge following dovish comments from a Bank of England policy maker. Gertjan Vlieghe said in an interview with The Times that heed needs to see evidence of wage growth before he would consider voting for a rate increase. He continued to say that higher inflation pressures alone would not be enough. Speculation of a Bank of England rate hike has grown in recent days after data showed annual inflation exceeded the Bank’s goal for the first time in 4 years. However, Vlieghe’s remarks throw some cold water on those expectations, weakening the sterling moderately.