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Weak U.S. Data, Political Uncertainty Dents Dollar; Fed Minutes Eyed

8/23/2018, 10:07:40 AMBasics of Trading
Weak U.S. Data, Political Uncertainty Dents Dollar; Fed Minutes Eyed

The dollar drifted lower against its rivals Wednesday on weaker U.S. housing activity as traders awaited the release of the Federal Reserve's minutes for clues on future monetary policy.

The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, fell by 0.07% to 95.06.

The dollar was under pressure after sales of previously owned homes in the U.S. unexpectedly fell in August, underlying ongoing weakness in the U.S. housing market as inventories of homes on the market remained tight.

The Commerce Department said existing home sales fell 0.7% in July from the prior month to a seasonally adjusted annual rate of 5.34 million units. Economists were expecting a 0.6% increase to 5.44 million homes.

The greenback had made a subdued start to the session as traders digested the implications of President Donald Trump being implicated in crimes by his former personal lawyer.

Michael Cohen on Tuesday said Trump paid him to buy the silence of women during the 2016 election campaign.

Trump responded to the allegation on Wednesday, claiming Cohen had fabricated his testimony. “Unlike Michael Cohen, he (Paul Manafort) refused to ‘break’ --make up stories in order to get a ‘deal,’" Trump said in a tweet.

Investor focus could shift away from the political turmoil in Washington to monetary policy, as the Federal Reserve releases the minutes of its July 31- Aug.1 meeting. The minutes could provide clues as to the Fed's plan on future rate hikes.

But the backdrop of political uncertainty failed to bid up safe-haven yen, which continued to trail against the greenback.

USD/JPY rose 0.26% to $110.54, while GBP/USD tacked on 0.09% to $1.2907.

EUR/USD gained 0.19% to $1.1592 as traders remained skittish on Italy as doubts grew about the country's ability to balance its books as the government eyes a big spending plan to fulfill its promises to voters.

USD/CAD fell just 0.16% to C$1.3015 as firmer oil prices, which tend to support the loonie, did little to dent the pair amid focus on NAFTA negotiations.