Dollar Attempts Recovery as EUR/USD Rally Fades Ahead of Italy Vote
The U.S. dollar cut its losses against its rivals Monday on mostly positive data and a retreat in the euro from highs as Italy faces a parliamentary vote to rubber stamp its new government on Tuesday.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell by 0.12% to 94.05, after falling to a session low of 93.63.
The Commerce Department said on Monday the final reading of durable goods orders fell 1.6% last month, in-line with economist.
Non-defense capital shipments rose 0.9 %, beating expectations for a 0.8% rise.
The greenback's timid start to the week comes ahead of next week's widely expected Fed rate hike and recent data showing traders trimmed their bearish bets on the dollar.
For the week ending May 29, dollar shorts fell 16,000 and sit now at minus 12,000, narrowing the discount on the dollar, pointing to "a higher hurdle for further rounds of dollar strength," JPMorgan said.
Ahead of the parliamentary vote on Italy's new government, sentiment soured on the EUR/USD, which fell to $1.1688 from a high of $1.1745, aiding the greenback's recovery from session lows.
Italy’s new populist government is reportedly preparing for a confidence vote in both houses of parliament, which could reportedly come as soon as Tuesday.
The two populist parties – Five Star Movement and League – hold a majority in both houses of parliament, but boast a slender margin over the opposition of just 14 votes in the 320-seat Senate.
Analysts expect some friction to emerge in the second round of parliamentary votes on which of the expensive electoral promises from each party to keep.
GBP/USD fell 0.27% to $1.3312 as reports that the UK parliament could vote on the Brexit deal on June 12 unnerved traders.
USD/CAD fell 0.16% to C$1.2931, while USD/JPY rose 0.15% to Y109.69