“Each progressive revelation of the current administration’s incompetence is wearing thin on investors’ psyche,” Stephen Innes, senior trader at OANDA, said in a Wednesday notes. “Even the most ardent conservative must now have second thoughts about their November (2016) election day decision. Needless to say, what little support that remained for the strong-dollar theme this week quickly evaporated.”
Innes said he expected that when it came to the dollar’s direction, the political scandal would overshadow U.S. Federal Reserve chief Janet Yellen’s testimony to Congress on Wednesday.
He expected Yellen would largely repeat the Fed’s latest meeting minutes, without offering fresh cues to boost the greenback.
But Innes also noted that Philadelphia Fed chief Patrick Harker’s unexpected interview with the Wall Street Journal contained comments that leaned dovish, which also weighed on the dollar.
Kathy Lien, managing director of foreign-exchange strategy at BK Asset Management, also attributed the euro’s surge to the Trump scandal.
“No Eurozone economic reports were released today so this was purely a function of anti-dollar flows,” she said. “The email correspondence between Trump Jr. and a Kremlin-connected Russian lawyer makes investors nervous and they are turning to the euro, with its steady data improvements and hawkish central bank for safety.”
She said she “wouldn’t be surprised” if the euro tested the $1.15 level before the Yellen testimony.