After falling yesterday, the US dollar is once again selling off this morning. The tax bill is now looking almost certain to pass after Senators Susan Collins and Mike Lee both supported the current draft. The House of Representatives will vote on the bill today at 18:30 GMT (13:30 local time). The Senate vote will follow either later today or tomorrow. While changes to the US tax code are now almost certain, the US dollar remains weak as markets question to what extent tax cuts will drive the currency. While US stock markets remain in record high territory, the dollar and bonds are weakening. Our medium-term outlook on the US dollar remains neutral.
USD/JPY is flat today and currently trading just above 112.50. EUR/USD is up slightly today and currently just above 1.1790. The pound is up slightly, with GBP/USD currently above 1.3380.
This is a reasonably light week for the US dollar in terms of economic data and events. Later today, 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.