IC Markets

Greenback Turns Weak against Euro and Pound

US DollarThe soft GDP growth outlook issued by Fed and weak US core inflation data has made the Greenback turn bullish against Pound and Euro. The Euro and Pound continue to remain strong against US Dollar after 1.1% monthly growth in UK retail sales in November and 0.2% industrial production growth in Eurozone.

The positive economic data from the United States and the tax reform bill which is certainly to get passed in House of Representatives and Senate have made the US Dollar bullish.

The Euro is at its best position against US Dollar since 2004. As of now, the currency has risen approximately by 12 percent against Greenback and is only 3 percent away from 2-1/2 year high of around $1.21. In January, the market analysts and traders were speculating the likelihood in the parity of euro-dollar. However, the Eurozone economic recovery has made the euro bullish and US Dollar bearish after the Trump administration was unable to repeal the “Obama Care Bill“.

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The US Congress led by the Republican Party is all set to pass the tax reform bill in the coming days. As a result of which, the US market has turned bullish because it is going to be a big legislative win for the Trump party. Analysts have already started making predictions of the profits made by the multinational companies having headquarters in the United States.

It is expected that the companies would make an average of 10% increase in profit with a maximum of 30% in certain cases. Banks, railroads, airlines and oil refineries are going to benefit maximum of the cut-rate from 30 percent to 21 percent. It is interesting to note that Delta Airlines have already announced a profit in the range of 18-19 percent in profits registered in 2018. The USD is likely to increase in value as US repatriations increase.

As per US Census Bureau, there is a decline of 1.30 million in building permits in the month of November 2017 as compared to 1.32 million in October 2017. However, the building permits have surpassed the expectation of the analysts of 1.27 million. Likewise, the number of housing starts increased to 1.30 million in November as compared to 1.6 million in the earlier month. It has also exceeded the expectation of analysts of 1.25 million. It is the fastest growth rate registered in 10 years.

According to the report submitted by the Bureau of Economic Analysis, there is a decline of $101 billion in current account deficit in the 3rd quarter of 2017 from a deficit of $124 billion in its earlier quarter. Analysts were hoping for a deficit of $116 billion.

While the aforementioned facts and figures are likely to turn the Greenback bullish, a strong rally in November will make the Pound weak as well. The exhaustion is clearly visible on the charts. Also, the delay in talks between the UK and European Union is creating doubts from a worse exit of UK from EU in 2019.

The German Ifo Business Climate Index reading is showing a decline of 117.20 in December 2017 as compared to analysts expectation of 117.6. This, in turn, has made Euro weak. In November 2017, the business outlook index has recorded an all-time high figure of 117.6.

Hence, Greenback is likely to turn bullish against Euro and Pound due to the US tax reforms and upbeat economic data.

Steven Rudford

Steven Rudford

Hello, my name is Steven Rudford. Welcome to Top10FX.net. Follow my website for the most trustworthy Forex broker reviews and last minute financial trading news.

IC Markets

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