After opening higher at the start of the day, the US dollar is slightly lower this morning. House and Senate Republicans have largely reconciled the two versions of the tax bill. According to a Reuters report, Republican leaders have communicated their belief that the tax bill is set to pass as early as Tuesday this week. Once the bill is passed by Congress, the final step is for President Trump to sign the document into law. Despite the optimism, Republican Senator John McCain is set to skip the vote due to health issues. Senator Thad Cochran, who has also been away for health reasons, is expected to return this week in order to vote for the bill. Until the vote goes through, reactions in the US dollar are likely to be muted. Our medium-term outlook on the US dollar remains neutral.
USD/JPY is up slightly today and currently trading just above 112.60. EUR/USD is up today and currently just above 1.1760. The pound is up slightly, with GBP/USD currently above 1.3340.
This is a reasonably light week for the US dollar in terms of economic data and events. On Tuesday, we’ll get housing data including building permits and housing starts. We’ll also see the current account for Q3. On Wednesday we’ll see existing home sales. Thursday is the most important day. We’ll see Q3 Core PCE, GDP growth, initial jobless claims and the Philly Fed Manufacturing Survey. On Friday we’ll see November Core PCE, durable goods, and new home sales. Last week, Core CPI missed expectations and the Fed signaled a continuation of the status quo.
As the dollar rebounds from its lows in early September, we are upgrading the US dollar to neutral. The currency is neither overbought nor oversold today, and trades within a normal range. This is based on technical indicators when looking at a weekly chart.