The U.S. dollar turned modestly lower late Wednesday, as foreign-exchange investors continued to track developments in trade, including White House remarks that Canada and Mexico could benefit from potential exemptions from tariffs on national security grounds.
News about top economic adviser Gary Cohn, a former Goldman Sachs executive widely regarded as a steady hand in the Trump administration, resigning arrived late Tuesday, rattling the dollar.
What are currencies doing?
The ICE U.S. Dollar Index
a gauge of the greenbacks performance against six rivals, was little changed in negative territory at 89.577. The index on Tuesday fell 0.5%, according to FactSet data.
Read: Dollar hedging is more expensiveand that makes the U.S. less attractive to foreign investors
The WSJ U.S. Dollar Index
which tracks the dollar against 16 rivals, was little changed at 83.47.
The dollar remained lower against the Japanese yen
as it bought 楼106.05, compared with 楼106.12 late Tuesday.
rose to $1.2412, from $1.2404 on Tuesday.
The British pound
traded at $1.3903, little changed from $1.3888 in the prior session.
The dollar remained higher versus the Canadian dollar
, but pared some of its gains following the news of potential tariff exemptions for Canada and Mexico. One buck last bought C$1.2901, up from C$1.2878, but lower versus the session high of C$1.3002 a fresh eight-month high.
The Mexican peso
reversed course and strengthened against the greenback on the exemption headlines, with the dollar last buying 18.7183 pesos, down from 18.7397 pesos late Tuesday.
Read: These currencies have the most to lose as Trump prepares tariffs
Whats driving the markets?
The dollar spent most of Wednesday recovering from the losses it suffered late Tuesday following reports that Cohn will be leaving his role as the head of Trumps National Economic Council. Cohn is seen as the driving force behind U.S. corporate tax cuts that were signed into law last year.
But Cohn opposed Trumps plan to impose tariffs on global steel and aluminum imports into the U.S. The European Union said Wednesday it has been circulating a provisional list of U.S. products it could hit with levies if Trump unveils his tariffs. The final version of the tariffs is expected to be announced later this week.
Read: We can also do stupidEU leader responds to Trumps tariff plan
Late Wednesday, the White House said that Canada and Mexico which are partners with the U.S. in the North American Free Trade Agreement, which is currently being renegotiated could potentially get exemptions from the tariffs on national security grounds.
Read: Tariffs raise the odds of U.S. terminating Nafta: Goldman Sachs
Also read: Heres what worries currency traders after Europes big political headlines
Canada would be hit hardest by its neighbors tariffs, as it is the largest exporter of steel and aluminum to the U.S. The Bank of Canada, which left its key interest rates unchanged on Wednesday, said recent developments in trade policies were worrisome for global and Canadian economic growth.
See: Trade fears and dovish central bank limit Canadian dollars upside
What are strategists saying?
Investors are viewing [Cohns] resignation as a sign the U.S. could be heading for a trade war, said David Madden, market analyst at CMC Markets U.K., given Cohns stepping down comes at a time when the president is talking about imposing tariffs on imported steel and aluminum. The possibility of a protectionist stance from the White House flies in the face of Mr. Cohns free-market views.
While no change is expected to the overnight rate (hike probability is only 13%, according to interest rate swaps), all eyes will be on the [Bank of Canadas] rate statement and any change in tone especially regarding the recent softening of Canadian macro data as well as the current spat regarding trade tariffs with the U.S., said analysts at Caxton FX.
Whats on the economic calendar?
A lengthy lineup of data started with the ADP employment report for February, which came in at 235,000, compared with 234,000 previously.
The January trade deficit widened by 5% to $56.6 billion, almost a 10-year high, compared with the MarketWatch consensus estimate of $55.2 billion.
U.S. productivity was flat in the fourth quarter of 2017, while unit-labor costs rose 2.5%, exceeding the consensus estimate of 2.2%.
The Federal Reserves Beige Book report showed steady modest to moderate growth in the U.S. in January and February, as well as building inflationary pressures.
Consumer credit for January fell to $14 billion, compared to $19 billion before.
Check out: MarketWatchs Economic Calendar
There were two Federal Reserve officials on the speaker list Wednesday. New York Fed President William Dudley was to talk about the impact of the hurricanes to the Puerto Rico Chamber of Commerce in San Juan, and Atlanta Fed President Raphael Bostic was scheduled for a fireside chat on economic outlook in Fort Lauderdale, Fla.
Related Topics Currency Euro Yen Pound U.S. Dollar Federal Reserve
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