The Dollar had a very volatile week but its index against a basket of major currencies ended almost exactly where it had begun at 93.50. On Monday the S&P 500 Index ended the day up 0.3% at 2,659; a new record close, led by the telecoms, technology and energy sectors. Tuesday brought the dollar’s high for the week at 93.81 as the Fed began its two-day FOMC meeting but then came news from a highly controversial Senate election in Alabama; a deeply conservative southern State. Mr. Trump had given enthusiastic support to a former judge, Roy Moore, who faced a series of allegations about misconduct and who had previously said that he does not believe that Barack Obama was born in the US and that Muslims should not be allowed to serve in Congress. Mr. Moore was defeated by Democrat Doug Jones; a move which not only questioned the President’s judgment, but reduces the Republican majority in the Senate to just one seat.
The Fed Statement on Wednesday noted, “the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong.” In its new economic projections, it revised up 2018 GDP forecasts from 2.1% to 2.5% with further more modest upgrades to the outlook in 2019 and 2020. Though two of the nine voting members dissented, there were no downward revisions to future ‘dot points’ and the belief that inflation would indeed pick up was again reiterated.
Despite what looked to be a very non-controversial Statement and subsequent Press Conference, the Dollar extended its decline in the last 2 hours of trading in New York, with the index falling to a 1-week low of 93.00. Thursday was pretty uneventful for the USD and Friday also got off to a sluggish start. From the New York opening on Friday, however, stocks began to surge on news that the last Republican hold-out on tax reform was now going to offer his support after being offered some concessions on child care provisions. The S+P 500 index jumped a stunning 25 points to a fresh closing high, dragging the USD index up three-tenths to end a volatile week exactly where it had begun at 93.30.
The US Dollar index opens this morning in Asia at 93.50 with all eyes on the passage through Senate of the tax reform bill. Vice President Mike Pence has delayed a trip to the Middle East as the Republican majority is so slim the party can’t afford even to have one Senator away…