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As the US dollar climbs against its main counterparts, positive fundamentals for the US economy fail to support US share indices

As the US dollar climbs against its main counterparts
As the US dollar climbs against its main counterparts

With all of the current geopolitical tensions at the forefront, FX traders might be forgiven for taking their collective eyes off the ball when it comes to the economic calendar. The crises affecting the United States, such as the collapse of the North Korean summit, the fading of China-US trade talks, and Trump's personal lawyer washing their dirty laundry on Capitol Hill, have diverted analysts' and FX traders' focus away from the economic calendar.

The exceptionally favourable data on Tuesday afternoon, which outperformed the projections and targets by a wide margin, while positively impacting the value of the US dollar, served as a reminder of how vital it is to diarise economic calendar events. New home sales rose 3.7 percent in December, compared to an expected drop of -8.7%, shattering the Reuters projection. The latest non-manufacturing services ISM score rose to 59.7 in February, exceeding the Reuters prediction of 57.3 and much higher than the January figure of 56.7.

As these latest metrics were announced, the dollar gained, with USD/CHF breaking through the first two levels of resistance and threatening to reach R3. The key pair was up 0.60 percent on the day at 18:30 U.K. time on Tuesday, continuing a positive trend for the Swissy after whipsawing in a wide range, alternating between bullish and bearish inclinations, throughout the most of February's trading sessions. The dollar rose 0.30 percent against the euro and 0.35 percent against the Canadian dollar. The DXY, or dollar index, rose 0.17 percent to 96.85. The SPX and the NASDAQ both ended the day with little losses, with the SPX down 0.11 percent and the NASDAQ down 0.02 percent, respectively.

Staying in North America, the Canadian dollar fell against several peers on Tuesday as a result of government resignations, a general lack of trading data confidence, and concerns that the Bank of Canada (BOC) would signal a more dovish stance after announcing its interest rate decision during Wednesday's trading sessions. At 19:15pm, the USD/CAD was trading at 1.333, breaking R1, up 0.25 percent on the day. The Bank of Canada (BOC) is widely expected to keep its interest rate at 1.75 percent, but the accompanying monetary policy statement and/or news conference delivered immediately after the announcement can cause the relevant currency to move.

The latest balance of trade deficit is expected to be -$57.8 billion in December, up from -$49.3 billion in November, according to the latest economic calendar data from the United States. Such figures once again demonstrate the precarious position in which the United States finds itself in terms of its numerous trade imbalances with its peer countries. The ADP employment number, which is often used as a predictor of the NFP jobs number released at the end of the same week, is expected to show only 190k jobs added in February, down from 213k in January.

The Fed releases its Beige Book late in the New York session, at 19:00pm U.K. time. It's an eight-times-a-year study released by the United States Federal Reserve Board, formally known as the Summary of Commentary on Current Economic Conditions. The report is released ahead of the Federal Open Market Committee's meetings. The report is frequently used in conjunction with the FOMC minutes and the most recent monetary policy statement.

During Tuesday's trading hours, sterling gave back some of its recent gains. The drop could be attributed to profit-taking and comments from the Labour Party opposition that they would not support the exit agreement, which was rejected by historic numbers in January. Mrs. May is suspected of delaying the process in order to bully MPs into accepting the initial offer, which, if not voted through, would result in the UK leaving the EU without a deal.

Currency pairs such as EUR/GBP and GBP/USD may have whippedsawed in large ranges during the day's trading sessions due to the lack of Brexit political developments. For example, after breaching R2, EUR/GBP gave up its day gains, sliding back through the daily pivot point, and closing the day down 0.25 percent at 19:30pm. GBP/USD followed a similar trend, sliding through the second level of support before recovering to trade above the daily pivot point, close to flat on the day, at 1.317. The FTSE 100 finished 0.67 percent higher. The CAC gained 0.21 percent, while the DAX gained 0.24 percent.


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