USD set to close lower against all the major currencies, barring swiss franc - BBH

The month ends today, and the dollar is poised to finish the month lower against all the major currencies, but the Swiss franc as technical conditions remains fragile and there is a little sign a significant low is in place, according to analysts a BBH.

Key Quotes

“In terms of policy, investors appear to put more weight on the forward guidance of central banks that the Federal Reserve. Meanwhile, the failure of the health care reform efforts not only leave the US system is poor shape but warns the Republican leadership may struggle to overcome the divide between moderate and conservative factions to pass the economic agenda of the new administration.  The same broad strategy that was tried with health care is being employed for tax reform:  base approach solely on slim Republican majority, develop plan secretly with a small group of men, hope that it can bridge an intra-party divide that appears bigger than the inter-party rivalry.”  

“The hubris of small differences can be formidable hurdles, and important legislative action is needed to lift the debt ceiling and to provide spending authorization for the new fiscal year that begins October 1.Maneuvering around the debt ceiling is already distorting the bill market.  The finesse will likely be exhausted in early October.  If it is not resolved it could lead to prioritizing creditors and missing payments.  The failure to agree on spending authorization could shut the government.  A push back against our argument since the June FOMC meeting that the Fed would announce the start of its balance sheet operations in September is that the Fed will not want to move if it looks as if there will be a government shutdown.   The Federal Reserve seems to try to look past such short-run potential disruptions and focus its strategic goals.”

“Although Macron's honeymoon in France appears over, and Japan's Prime Minister Abe's support is at five-year lows, marooning his political agenda, the general euro-phoria and dollar-negativity remain intact. The Dollar Index fell for its third consecutive week, and on Monday, will put the final touches on its fifth straight monthly loss.    Our assessment is unchanged:  the technicals are stretched, but there is nothing convincing to suggest a low is in place.  Previous support around 94.00 now becomes resistance, and a move above 94.30 would be encouraging.  However, the downside beckons.   The 93.00 area would be the next obvious target, but technical support may not be seen until closer to 92.60.”