US Dollar Doesn’t Respond Well to Good News

Today’s fundamentals looked positive for the US dollar with good housing data and the Congress voting for the final version of the tax reform bill. Yet the greenback did not respond well to the news, falling against almost all of its major rivals, with the exception of the Japanese yen.

The Senate voted for the bill early Wednesday but had to sent it back to the House of Representatives, which passed it on Tuesday. It turned out that due to a procedural error the House had to revote, though it was viewed as just a formality. And it looks like now the bill is going to US President Donald Trump for signature after all.

There are plenty of critics of the reform, who claims that the legislation benefits only the rich Americans, not middle-class citizens. And it is not going to translate in higher employment and wage growth as corporations have little incentive to hire more people or raise wages. Due to the doubts that the reform will be beneficial to the US economy and the fact that it has been already priced in, the dollar did not react to the news. In fact, some market analysts argued that the US currency has strong downside potential as traders may employ the “buy the rumor, sell the fact” tactic.

EUR/USD rallied from 1.1838 to 1.1885 as of 18:38 GMT today. GBP/USD ticked up from 1.3384 to 1.3395, though retreated from the daily high of 1.3418. USD/JPY rose from 112.88 to 113.28.

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