Talking Points:

  • US Dollar at the mercy of Washington, DC on healthcare bill vote
  • Yen down as Asian stocks advance, NZ Dollar sunk by trade data
  • Euro unlikely to find lasting direction cues in flash PMI surveys

The US Dollar roared higher in Asian trade, gaining ground on all of its G10 FX counterparts. Prices advanced alongside front-end Treasury bond yields, pointing to firming Fed policy bets as the source of the greenback’s newfound strength.

The US unit has been on the defensive since last week’s FOMC rate decision delivered a widely expected hike but offered nothing to bolster the case for a steepening rate hike path thereafter (as suspected). Today’s change of direction appears linked to a looming vote on a health care bill meant to replace so-called “Obamacare”.

US President Donald Trump laid down the gauntlet to members of his own Republican party. He threatened to abandon health care and move on to tax reform if they do not pass the American Health Care Act (AHCA) championed by Speaker Paul Ryan in a House of Representatives vote on Friday.

The AHCA has met with resistance from the right and moderate wings of the Republicans. Needless to say, the opposition Democrats are also not on board. Loud wrangling over its contents has turned its passage into a referendum on the Trump administration’s ability to get legislation through Congress.

Trump’s campaign promise of deregulation, corporate tax cuts and generous infrastructure spending stoked growth and inflation bets, sending USD higher alongside stock prices and birthing the “Trump trade”. Those moves may reverse if the failure of the AHCA suggests that the White House is unable to execute.

Within this context, the Dollar’s Asia-session gains probably reflect precautionary unwinding of short exposure rather than confidence in the passage of health care reform. The currency slid to a two-month low this week and traders probably felt over-extended ahead of such potent event risk.

The Yen and the New Zealand Dollar bore the brunt of losses. A rebound across Asian stock exchanges compounded pressure on the perennially anti-risk Japanese unit. Meanwhile, the Kiwi was battered after data showed that the trade deficit unexpectedly widened to the largest in almost eight years in February.

The March set of flash Eurozone PMIs headlines the calendar in European hours. The region-wide composite index is forecast to show a slowdown in manufacturing- and service-sector growth. That may mean little for the Euro however considering its limited implications for near-term ECB monetary policy.

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Asia Session

US Dollar at the Mercy of Washington on Healthcare Bill Vote

European Session

US Dollar at the Mercy of Washington on Healthcare Bill Vote

** All times listed in GMT. See the full DailyFX economic calendar here.

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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