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Dollar Subdued as GBP/USD Fights Back, U.S. Housing Data Fall Short

6/21/2018, 11:00:23 AMMarket Analysis
Dollar Subdued as GBP/USD Fights Back, U.S. Housing Data Fall Short

The U.S. dollar was roughly unchanged against its rivals Wednesday as softer U.S. economic data and a rebound in sterling kept a lid on upside momentum.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose by 0.01% to 94.66 after trading as high as 94.98 during the session.

The dollar come under pressure after sales of previously owned homes in the U.S. unexpectedly fell in May, as tight supply, higher prices and mortgage rates weighed on housing activity.

The Commerce Department said existing home sales declined 0.4% in May from the previous month to a seasonally adjusted annual rate of 5.43 million units. That undershot economists' forecast for a 1.5% rise to 5.52 million units.

The dollar's momentum was also held back by a rebound in GBP/USD to $1.3197 as UK Prime Minister Theresa May won a key vote on the Brexit Withdrawal Bill, averting the need to give parliament a "meaningful" vote on the eventual terms of a trade deal with the EU.

The dollar had hit session highs earlier, buoyed by a sharp rise in the 10Y Treasury yield amid fading U.S.-China trade war fears and somewhat hawkish comments from Federal Reserve chairman Jerome Powell.

Fed chairman Powell said the case for gradual rate hikes was "strong," reaffirming investor expectations the central bank would raise rates twice more in 2018.

Easing trade concerns, meanwhile, reduced investor appetite for safe-havens, pressuring both the yen and Swiss franc against the greenback.

USD/JPY rose 0.15% to Y110.20, while USD/CHF gained 0.16% to 0.9962.

EUR/USD fell 0.02% as European Central Bank president Mario Draghi said the central bank would continue its patient approach to monetary policy tightening.

USD/CAD fell 0.16% C$1.3301 as softer oil prices and a worsening North American Free Trade Agreement (NAFTA) continued to weigh on the loonie