US Dollar Edges Lower as Political Tensions Reduce Appetite for Risk

The US dollar moved lower against the euro on Monday amidst light trading, as traders’ appetite for the greenback weakened due to growing political tensions in the United States. The US currency also dropped against Canada’s dollar, despite lower Canadian wholesale sales than expected in June.

Last Friday, a White House spokeswoman announced that Chief Strategist Stephen Bannon is leaving his position after months of clashing with other senior advisors. Bannon, who had helped President Donald Trump win the presidential elections in 2016, was removed from Trump’s staff under the president’s request.

The departure of Bannon, who is a right wing nationalist, raised speculations of a possible link to the racial violence in Charlottesville, Virginia on August 11. Public outcry for Trump to fire white nationalists among his advisors followed the president’s insistence to blame both nationalists and human rights activities in the violent clashes in Charlottesville. Nationalists within the White House were led by Bannon.

However, firing Bannon may cost Trump the support of the right wing groups that have supported him over the past year. Before being chosen to be Trump’s chief strategist, Bannon was an executive chairman at Breitbart News, a far right news website, a position that he now resumed.

Concerns that Bannon may be more disruptive to the Trump administration from outside were quickly stoked after Breitbart News editors attacked the president’s decision. Bannon is considered to be one of the most influential people within the political news media industry. Negative influence from Bannon’s media machine can potentially harm Trump’s economic plans, which added to traders’ mounting uncertainty over their success.

Outside the United States, geopolitical risks lingered as trading began this week. A terrorist attack last Thursday in Barcelona, which killed 14 people, rattled traders. Further geopolitical tensions came from North Korea’s warning on Sunday that joint military exercises between the United States and South Korea that starts today will add fuel to the fire.

Trading was light today amid these developments, as traders took a cautious approach ahead of the Federal Reserve’s economic conference in Jackson Hole, Wyoming. The conference, which will begin on August 24, is expected to bring remarks from Federal Reserve Chairwoman Janet Yellen on the road the US monetary policy may follow in the near future.

European Central Bank President Mario Draghi is also expected to comment on his bank’s monetary policy, with some analysts forecasting that he may announce cutting the bank’s quantitative stimulus.

The US dollar declined against its Canadian peer today, despite disappointing Canadian wholesale sales. A report released by Statistics Canada said that wholesale sales decreased 0.5% in June, a bigger drop than the 0.4% that analysts had estimated.

EUR/USD rose to 1.1819 as of 16:45 GMT on Monday, the pair’s highest level since August 14, from 1.1760 when trading began this week. USD/CAD traded at 1.2579 after dropping to 1.2568 at 13:50 GMT. USD/CAD started the day at 1.2587.

The Dollar Index, which tracks the performance of the US currency against a basket of its major peers, dropped to 93.07 as of 16:42 GMT today from 93.43 on Friday.

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