Dollar punished by political drama in Washington
FXTM Research Analyst Lukman Otunuga comments.
The Dollar lost its shine and sulked around a 14-month low against a basket of global currencies during Tuesday’s trading session as political drama in Washington clouded the prospects of another US interest rate hike in the coming months. Sentiment towards the Dollar was already heavily bearish, when sellers were given a fresh opportunity to attack on Monday, following reports of White House communications director Anthony Scaramucci, being fired after less than 10 days under his belt. Waning confidence in Washington over Trump’s ability to move forward with tax reforms and the fiscal stimulus that markets have been heavily betting on, has made the Greenback vulnerable to further losses.
It has certainly been a rough trading year for the US Dollar, as it posted its fifth straight monthly drop in July. As August gets under way, the unsavoury combination of political risk and concerns over stubbornly low inflation in the US, are likely to put more pressure the Greenback -further weakening its position against other major currencies.
As the Dollar struggles to nurse its deep wounds, investors may direct their attention towards Friday’s NFP report for further insight into the health of the US economy and labour force. From a technical standpoint, the Dollar Index is heavily bearish on the Daily charts. Repeated weakness below 93.00 should encourage a further deprecation towards the 92.00 support level.