Dollar Softens as Euro, Sterling Bounce and Market Is Said to Overlook Trump's Impeachment  

Image © White House

- USD lower Vs GBP, EUR as ING tips range trading. 

- USD to overlook impeachment of President Trump.

- Senate seen blocking further action from Democrats.

- Global factors to drive USD price action Thursday.

- BoE decision, NZ GDP and AU jobs data all in mix.

The Dollar softened early on Thursday but analysts say the declines are the result of external factors, which are likely to continue dictating price action through the rest of the session, rather than the impeachment of President Donald Trump by the House of Representatives in Washington. 

President Donald Trump was impeached for alleged Abuse of Power and Obstruction of Congress by the Democratic Party-controlled House in the early hours of Thursday morning, over allegations he pressured Ukraine to investigate former Vice President Joe Biden, a possible rival in the 2020 presidential election campaign. Impeachment paves the way for a trial of the White House incumbent in the Republican Party-controlled Senate where a two thirds majority of 67 out of 100 votes is required to convict.

It's widely expected that the Democrat attempt at ousting Trump from office will end in a quick dismissal by the Senate. 

"President Trump’s impeachment process has had and should continue to have little impact on USD. While impeached in the House, the Republican-held Senate is unlikely to remove the President from office. Importantly, the impeachment doesn’t appear to be affecting the President’s rating," says Petr Krpata, chief FX and bond strategist for EMEA at ING. "The lack of meaningful US and EZ data today points to (yet again) range-bound EUR/USD."

Above: Euro-to-Dollar rate shown at hourly intervals.

Trump's economic policies have lifted the Dollar so anything that endangers his tenure in the White House might not be taken well by the U.S. currency, although markets have rarely taken seriously any of the multiple investigations into Trump's conduct both on the campaign trail in 2016 as well as during his time in the office. However, movements in opinion polls ahead of the November 2020 election might begin to have an impact next year.

"Republicans have already strongly stated that they will continue to support President Trump. It highlights why the FX market remains largely indifferent to impeachment proceedings. A Gallup poll released overnight even signalled that President Trump’s popularity could be benefitting from the “witch hunt”. The FX market will become more sensitive to US political developments as we move closer to next year’s US Presidential election," says Fritz Louw, a currency analyst at MUFG. "Market participants will be closely watching resistance for USD/JPY provided by recent highs at around 109.73 and then the 110.00-level as potential triggers for an extended yen sell-off."

Above: Dollar Index shown at daily intervals.

The Dollar Index was down 0.09% at 97.31 Thursday after the U.S. unit ceded ground to the Pound, Euro and Swedish Krona, which collectively account for around 70% of flows tracked by the benchmark.

Above: Pound-to-Dollar rate shown at hourly intervals.

Sterling was higher ahead of the December interest rate decision of the Bank of England while there was no obvious trigger for gains in the Euro. However, the greenback also rose against the Japanese Yen and Swiss Franc as well as riskier rivals outside of the Dollar Index like the Australian and New Zealand Dollars, which were both boosted by domestic economic data overnight. 

"AUD/USD spiked by 0.4% and is trading around 0.6880 after Australian employment surged by 40,000 in November," says Richard Grace, head of FX strategy at Commonwealth Bank of Australia. "Despite the much stronger than expected result, Australian cash rate futures reduced the chance of a 0.25% cut in February by only 11pp to 48%.  Rate cut pricing will be a headwind to further large gains in AUD/USD and bear down on AUD/NZD."

Above: AUD/USD rate shown at hourly intervals.

New Zealand's Dollar advanced on the greenback and others are third-quarter GDP figures came in ahead of expectations while its Australian counterpart was lifted by a surprise fall in the unemployment rate for November and stronger-than-expected growth in the number of new jobs created by the economy. The figures were seen by the market as making it less likely that the respective central banks will cut their interest rates again any time soon. Both have reduced rates three times in 2019 already.

"The NZ economy is expected to continue to improve over the next six months, with the housing market a notable contributor. The RBNZ is likely to remain on hold over that period. In contrast, an expected US slowdown from early 2020 should cause the Fed to cut its policy rate three times in 2020. The resultant increase in NZ-US yield spreads should lift NZD/USD," says Richard Franulovich, head of FX strategy at Westpac.

Above: NZD/USD rate shown at hourly intervals.

Time to move your money? The Global Reach Best Exchange Rate Guarantee offers you competitive rates and maximises your currency transfer. Global Reach can offer great rates, tailored transfers, and market insight to help you choose the best times for you to trade. Speaking to a currency specialist helps you to capitalise on positive market shifts and make the most of your money. Find out more here.

* Advertisement