US Dollar On The Defensive Over Weak Economic Data and Impeachment Push
US dollar lost some ground against a basket of other major currencies as traders reacted to weaker than expected consumer confidence data. The greenback outlook also dampened following remarks by President Donald Trump at the United Tensions that once again aroused concerns as to whether the U.S. and China will reach a trade agreement.
The dollar has already dropped to the 97.9 level this week after a pullback to 98.1 handle. Weighing on the greenback strength is the confirmation that consumer confidence in the U.S. fell the most in almost nine months in September, to 125.1 from 134.2 last month.
Consumer confidence plunging is a big blow as the U.S. economy has remained resilient in part because of increased spending. A further decline could elicit talk of rate cuts as a way of cautioning the U.S. economy
A confirmation that the Democrats in the U.S. are planning to impeach the president is another emerging tailwind that continues to pile pressure on the greenback after remaining resilient in recent months.
The U.S. House of Representatives is opening a probe as to whether the president sought help from Ukraine as part of an effort to smear democrat front-runner for the 2020 election Joe Biden. While it is highly unlikely that the impeachment drive will lead to Tramp removal from office, the uncertainty that votes with the process is what is weighing in on the dollar.
Political in fights in Washington could affect Trump ability to reach an agreement with China. Such a position could leave the world economy in a fragile position amidst growing concerns of a brewing recession.
“If an impeachment inquiry looks like ending his re-election chances in 2020, he may throw caution to the wind and harden his attitude to a China trade deal, increasing the chances of a global recession next year," said Jeffrey Halley, Senior Market Analyst, Asia Pacific, OANDA.
U.S. Political Uncertainty
The impeachment drive comes at a time when the U.S. is entangled in a fierce standoff with China over trade imbalance, something that continues to trigger fear in the financial market. Trump maintained that he would not accept a bad deal with China at the U.N. and continues to fuel concerns whether the long-running standoff will ever end.
Weakness in the dollar resulted in the strengthening of the Japanese Yen, given its growing appeal as a safe-haven in times of crisis. The USD/JPY consequently fell 0.1% on the weakness of the dollar back to the 107.44 level.
The USD/CAD, on the other hand, remained flat at the 1.3251 level.
The Swiss Franc just like the Japanese Yen, continues to edge higher, given its safe-haven status. The Franc is currently trading at highs of 0.9862 against the dollar and remains one of the best-performing currencies.
The British Pound rally continued in the wake of the Supreme Court ruling that the suspension of Parliament by Prime Minister Boris Johnson. The pound has gained more than 0.4% since the start of the week to highs of 1.2479 against the dollar.