US Dollar Weakens as Traders Remain Concerned About Political Instability

The US dollar weakened against a basket of its major counterparts on Monday as political woes continued to loom over the market, which reduced demand for the greenback. A cautious trading mood ahead of major data releases this week drove an index of the strength of the US currency to its lowest level since October 2016.

The political repercussions of a controversy that began when US President Donald Trump fired Federal Bureau of Investigation Director James Comey are still echoing in Washington. Comey was overseeing a probe into possible ties between Michael Flynn, Trump’s former security adviser, and Russia. The controversy was further stoked by reports of a memo that Comey wrote of a meeting he had with the president, during which Trump asked him to stop the investigation.

The developing story raised investors’ worries that Trump might have a harder time implementing his economic agenda that aims to stimulate growth and create more jobs. Some Republicans in the House of Representatives and the Senate already demanded an investigation into Comey’s meeting with Trump, which might cost the president some support from his own party.

Trump already faced hurdles in bringing his promises to reality ahead of the latest controversy. His first attempt to take down the Affordable Healthcare Act, which is widely known as Obamacare, ended when House Speaker Paul Ryan had to withdraw the American Health Care Act that was meant to replace Obamacare.

The president also received a negative reaction to an announcement that included details on his hyped tax plan. The announcement left investors unimpressed as it lacked any specific details on corporate tax cuts and the government’s ability to accommodate for them.

Monday saw no important economic releases in the United States, leading traders to prefer other major currencies over the US dollar in anticipation for signals on the direction the greenback may take this week.

The US economy will receive a stream of crucial data releases this week, including new readings for new and existing home sales from the Census Bureau and the National Association of Realtors on Tuesday and Wednesday, respectively. Furthermore, the Federal Reserve will release the minutes of the Federal Open Market Committee’s last meeting on Wednesday. The Bureau of Economic Analysis will also publish its second estimate for gross domestic product in the first quarter of the year on Friday.

EUR/USD traded at 1.1238 as of 20:35 GMT on Monday from 1.1259 at 14:00 GMT, the pair’s highest level since November 9. EUR/USD began trading this week at 1.1202. USD/CAD declined to 1.3499 after touching 1.3486 at 12:05 GMT, a level last seen on April 24. USD/CAD started the week at 1.3524.

The Dollar Index, which tracks the performance of the greenback against a basket of its major peers, dropped to 96.96 as of 20:34 GMT today from 97.14 on Friday.

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