The U.S. Dollar is trading at its best overall level in two weeks following news of a major breakthrough in budget negotiations in the American legislature.
Overview
President Donald Trump said he would support a deal in which the U.S. government’s borrowing limit would be suspended for two years. The idea is to boost spending and use it for infrastructure and other means to improve the pace of economic growth. This would represent a fiscal expansion that along with monetary policy aid could spark the economy in a major way and traders are feeling it taking long USD positions.
Other than this headline not much else is driving the buck further forward at the moment, but that could change if Existing Home Sales and the Richmond Fed Mfg. Indices impress at 10AM. Sales of houses are expected to contract after a major expansion in May of 2.5%, thus any uptick would be a surprise and solidify current ranges.
What to Watch Today…
- Existing Home Sales 10AM
- Richmond Fed Mfg. Index 10AM
Complete Economic Calendar can be found here.
EUR
The Euro fell to its lowest level in seven weeks, primarily affected by the dollar’s momentum that began with the budget-deal news last night. The contrast between the region’s economic performance and struggles with the optimism building over on our side of the Atlantic is the main factor maintaining the shared currency subdued.
While the Fed is expected to perhaps intervene with the economy via lower interest rates, the European Central Bank could follow suit with other easing measures. Long-Term Refinance Operations (LTROs) could be expanded and other ways to incentivize banks to lend and reserve less, lend more. Indeed, not much is looking positive that merits Euro rallying, so it may be stuck here for what is left of the month.
GBP
The Pound is down and now it is official that Boris Johnson has been voted in as Prime Minister by his Tory peers. Currently, no major news can change the fact that the U.S. seems to be headed towards steadier growth and the unsolved details of Brexit remain a dark cloud that bodes poorly for the U.K.
We shall see if something can resolve the friction and gridlock bogging down the nation, but it cannot wait forever to know if it can leave in good terms or not. There will be pressure to amend the deal and also to ask the country once again if they want the process to proceed or reverse it.
