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Dollar Fails to Advance on Bullish Housing Data as House Prepares to Vote

12/21/2017, 11:59:48 AMMarket Analysis
Dollar Fails to Advance on Bullish Housing Data as House Prepares to Vote

The dollar continued to trend lower against a basket of major currencies on Wednesday as bullish housing data failed to lift sentiment.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.2% to 92.86.

The National Association of Realtors said on Wednesday that existing home sales in November sales rose 5.6% to a seasonally adjusted annual rate of 5.81 million units. That beat economists’ forecasts for a 0.9% decline to 554,000 homes.

That upbeat home sales data raised investor expectation for an increase in consumer spending growth as home buyers are expected to furnish their new homes with new appliances and furniture.

Investor focus, however, remained on the progress of the tax bill as House Republicans are expected to vote on the tax bill again after passing it Tuesday following the Senate’s technical changes to the bill.

The dollar has struggled to advance on tax-reform optimism as some market participants suggested the potential benefits of tax reform have largely been priced in, while others questioned the extent to which lower taxes would lift the economy.

Also weighing on the dollar was euro strength as the single currency continued add to gains rising to $1.1875 against the greenback amid ongoing investor optimism in German Chancellor Angela Merkel’s ability to form a coalition government with the Social Democrats.

GBP/USD rose 0.14% to $1.3405, while USD/CAD fell 0.19% to C$1.2854 as rising crude prices supported an uptick in the Canadian dollar.

USD/CAD rose 0.19% to $1.2885 but gave up some of its gains from earlier in the session as rising oil prices offered support to the Canadian dollar.

USD/JPY rose 0.36% to Y113.30 as traders awaited the conclusion of Bank of Japan's two-day policy meeting for clues on whether the central bank would introduce plans to rein in its emerging stimulus programme.