Dollar Rides on US Senate 2018 Budget Approval

The US dollar rode the market during the Asian section, gaining against every other major currency. The dollar is feeding off news that the US Senate has adopted the 2018 Budget hence, gives room for speeding up consideration of President Donald Trump’s plan to enact tax cuts. The final approval of the budget unlocks a special procedure which allows Republican to pass a tax code rewrite without Democratic support.

Data from the US on Thursday showed decline in unemployment claims and a rise in Philly Manufacturing index. Friday will see the release of existing home sales which analyst forecast will drop to 5.30m from 5.35m.

The announcement of a coalition government between the Labour party and New Zealand First turned investors against the kiwi on Thursday. Citizens on September 23rd 2017 had voted an hung parliament with the ruling National party winning 56 seats and a Jacinda Ardern led Labour party won 46 seats, both falling short of the 61 needed to hold the reins of power. With 9 seats, New Zealand First held the balance of power, its decision on who to form a coalition with will determine who became prime minister. Winston Peter leader of New Zealand first on Thursday noted that regional development, addressing the infrastructure deficit and improving the lives of New Zealand’s most vulnerable people, would be priorities for the new government. Investors had anticipated a coalition government between the National party and New Zealand first which they were more comfortable with as the incumbent had returned the economy to a budget surplus and maintained economic growth for 8 years. The Labour party has promised to ruffle feathers with its immigration restrictions and changes it intends making to the Reserve bank of New Zealand if voted into power. The NZD plunged to 0.7030 from 0.7156.

The New Zealand economy thrives on its robust tourism sector, m/m visitor arrivals in New Zealand released on Thursday evening, showed 0.3% rise, while credit card spending showed a drop to 4.9% as released early Friday morning.

The Euro stayed unaffected by the tension brewing in Catalonia, as Carles Puigdemont ignored Prime Minister Rajoy's ultimatum. The prime minister awaits the senate's approval to invoke article 155 on Catalonia. The Euro continued its upward movement as EUR/USD rose to 1.185 with no major economic data released from the Euro-area on Thursday. Germany's PPI and the Euro-area's final current account are data to look for today. The coming week will be laced with flash PMI numbers for the Euro-area. Investors seem to be viewing the Catalan crisis as an internal problem in Spain, an opinion that might change if the article 155 is approved.

EU leaders started a two day meeting in Brussels on Thursday. The meeting which was supposed to focus on Brexit is moving past that as Britain seems confused at the moment. The meeting will now focus on the Catalan crisis, the Iranian nuclear agreement and deepen integration among EU members.

The British Pounds traded lower on Thursday against the dollar as GBP/USD fell to 1.3150. This is a spin-off from a 0.8% decline in retail sales in Britain in September erasing all the gains made the prior month. Retail sales dipped on the back of higher cost, the senior statistician noted that increased costs are reflected in the more rapid growth in the amount spent when compared with the quantity bought. Consumers in the UK are feeling the heat as inflation is well above wage growth, if inflation is taken into account wages actually dipped by 0.4% y/y. Imports have become more expensive on the back of a weaker pound. CPI in Britain at the moment is 3% well above the BoE's target inflation. Though the BoE remains positive on interest rate hike, soft economic data might force the apex bank to reconsider.

The Aussie got propped up on Thursday given positive employment data and growth in the Chinese economy. The AUD feeds off positive news from China given Australia's export relationship with China. Though Q3 GDP dropped to 6.8% as forecasted, industrial production jumped to 6.6% from 6% the prior period. According to the IMF, Asia accounts for 63.3% of the world's economic growth. Chinese president Xi Jinping at the twice a decade communist party congress noted that China accounts for 30% of global growth. The People's Bank of China's governor Zhou Xiaochuan has forecasted a 7% growth in GDP in the second half of the year.

The Canadian dollar has the floor today m/m CPI and core retail sales are to be released later in the day. The loonie traded flat against the dollar for most part of Thursday, after riding on the wave of a 1.6% rise in manufacturing sales on Wednesday which stalled a decline streak.

Gold reversed losses from three trade session on Thursday climbing as high as 1,290. The yellow metal however edged lower during the Asian session on the back of positive USD news. Brent crude closed 0.02% higher at $57.24.