The dollar (CURRENCY:USD) lost ground against other major currency in the early Wednesday trading session, as traders reacted to the unprecedented firing of FBI director, James Comey. The fall of Mr. Comey has once again raised concerns about the Trump administration, which the markets fear is losing public support.
Dollar Strength
Against the Yen (JPYUSD), the greenback shed 0.16% to lows of 113.82 as the AUD/USD rose by 0.19% to change hands at highs of 0.7356. The U.S dollar index which measures the strength of the greenback against a basket of six other currencies dipped to lows of 99.30 on the news.
The euro, on the other hand, came under pressure on Tuesday, as investors reacted to newly elected French president Emmanuel Macron’s plan to block public companies outside the block from bidding for contracts within the European Union.
The greenback was on a two-day winning streak prior to the dramatic exit of Mr. Comey. The U.S benchmark 10-year Treasury yields hit a five-week high in the Tuesday trading session. Overnight the dollar traded higher on increased optimism that the Fed will raise rates in June. A slew of positive comments from Fed officials in recent days has also helped strengthen the dollar waiting to see if it will recover from the current slump.
Fed Hike Talk
Hawkish comments by Kansas City Fed President, Esther George, all but helped push Fed rate expectations to highs of 80% on Tuesday compared to 63% last week. The Fed official is of the opinion that the Central bank should continue hiking rates gradually even though a slowdown in GDP and car sales continues to evoke concerns.
Talk of a Fed hike should remain the center of attention going forward taking into consideration key economic data on the way. Retail sales report and consumer Price index on Friday could help shape the dollar’s direction as the week comes to a close. Better than expected results should lead to the strengthening of the dollar. However, the greenback could fall should the two reports fail to meet investors’ expectations.