The Dollar had a poor week despite further record highs for the stock market, a rise in market interest rates at all points of the maturity spectrum and generally solid incoming economic data. Its index against a basket of major currencies opened on Monday morning at 93.50 which proved to be the high of the week; it subsequently fell almost without interruption. On Wednesday the US Senate at last approved the $1.5 trillion tax reform bill, which includes permanent tax breaks for corporations and temporary tax cuts for individuals, by a final vote of 51-48. Once enacted, the legislation will represent the most drastic change to the US tax code since 1986. The bill lowers the top individual tax rate from 39.6% to 37% and slashes the corporate tax rate to 21%, a dramatic fall from its current rate of 35%. Speaking at a Press Conference after the vote, Senate majority leader Mitch McConnell hit back against criticism that the tax overhaul was unpopular among the public. “If we can’t sell this to the American people, we ought to go into another line of work.” Let’s see if this line comes back to haunt him at some point in the future. By the end of the day, the US Dollar’s index against a basket of major currencies had fallen to 92.83; its weakest level for a fortnight. It remained stuck at this level right to the end of the week. The bumper crop of economic data in the US on Thursday was somewhat mixed. The second revision to Q3 GDP showed the annualised pace of growth slipped from a previously reported 3.3% to 3.2%, whilst weekly jobless claims rose much higher than expected from 231k the prior week to 241k. Against this very marginal softness, however, the Philly Fed survey jumped from 21.5 in November to 26.2 whilst the November index of leading economic indicators rose 0.4%, in line with consensus forecasts and the 15th consecutive monthly increase. The index was boosted by strong ISM new orders, higher stock prices, the positively-sloped yield curve, elevated consumer confidence and somewhat easier credit conditions. As markets wound down for Christmas on Friday, and the US Dollar remained under pressure, most attention focused on the so-called cryptocurrencies. Bitcoin at one point fell $4,000 on the day, taking its losses from last Sunday’s peak to almost $7,000. We defy anyone to actually try to spend bitcoin for any everyday transaction. It fails the first definition of money which is to be a medium of exchange. As for a store of value, that test remains to be met. It certainly will have brought losses to anyone who bought over the last couple of weeks, whilst the closure of trading platforms during periods of price volatility
suddenly makes the more traditional Dollars, euro and pound look so much more attractive. They are a store of value, a medium of exchange and thanks to your OFX account, can be switched instantly at little or no cost 24 hours per day.