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The spotlight was still on tax reform in the U.S. as the Senate moved closer to voting on their version of the bill, but a few more happenings in Washington also influenced dollar price action.

As expected, the OPEC announced an extension of their output deal until the end of 2018 but set a possible review for June in case the market overheats.

  • Canadian current account deficit widened from 15.6B CAD to 19.3B CAD
  • U.S. initial jobless claims at 238K vs. 241K forecast, 240K previous
  • U.S. core PCE price index up 0.2% as expected in Oct
  • U.S. Sept core PCE price index upgraded from 0.1% to 0.2%
  • U.S. personal spending up by 0.3% vs. 0.2% forecast
  • U.S. personal income up by 0.4% vs. 0.3% forecast
  • Chicago PMI down from 66.2 to 63.9 vs. 62.2 consensus

Major Events/Reports

OPEC output deal extended

The Black Crack Mafia concluded their pow-wow this week by announcing the widely-expected extension of their output deal by nine months.

Apart from that, the OPEC also decided to cap the output of Nigeria at around 1.8 million barrels per day. They have yet to reach an agreement when it comes to Libya’s output.

However, the cartel also signaled a possible review by June to decide if the deal will be called off in case the market is overheating then. For many, this meant that the extension is still not guaranteed to last until the end of 2018.

Another meeting with non-OPEC members is still coming up, and traders are waiting to hear confirmation of Russia’s participation in the deal and whether or not they would push for an exit plan.

Mostly upbeat U.S. data

Uncle Sam’s reports came in mostly stronger than expected, with a couple of figures signaling that dips in activity weren’t so bad after all. Well that explains Fed head Yellen’s optimistic tone!

The core PCE price index, which is rumored to be the Fed’s preferred inflation measure, came in line with estimates of a 0.2% uptick for October. The previous month’s reading enjoyed a slight upward revision from 0.1% to 0.2% as well.

On a year-over-year basis, the core PCE price index is up 1.4%, which is still notches away from the Fed’s 2% inflation target.

Meanwhile, personal income rose by 0.4% versus the projected 0.3% gain while personal spending increased by 0.3% versus the estimated 0.2% uptick, reflecting rising wages and spending activity. Two thumbs up for the consumer sector!

The Chicago PMI fell from 66.2 to 63.9 to show a slower pace of industry growth, but this was still higher than the projected 62.2 figure. Initial jobless claims came in at 238K, lower than the expected 241K increase in joblessness and the earlier 240K figure.

U.S. tax reform updates

All eyes and ears are still on Senate’s tax reform happenings, as dollar bulls keep looking out for any sign of progress. Earlier in the week, the tax bill cleared the Senate Budget Committee, which means that a full vote could take place in the coming days.

There are still a number of concerns from several senators, even from the GOP side, chief of which is the snap-back “trigger” amendment that would automatically raise taxes on corporations if economic targets are not hit or if the deficit swells.

Over in the House, the Joint Committee on Taxation released updated estimates on how much the Senate version of the bill could affect the deficit. From an earlier projection of increasing the national deficit by $1.4 trillion over 10 years, the JCT revised this to $1 trillion but still not enough to convince several lawmakers that the tax cuts would pay for themselves.

On a more hopeful note, Republican Senator John McCain remarked that the bill would boost the economy and give tax relief to all Americans, shoring up confidence that the GOP could get it through Senate.

More White House drama

In another part of Washington, tension is brewing over the rumored replacement of Secretary of State Tillerson with CIA director Mark Pompeo as the former remains at odds with Trump’s fiery response to North Korea’s provocations.

As you’ve probably guessed, Tillerson has been pushing for a more diplomatic approach that would hopefully prevent further enraging Kim Jong-Un, but we all know how the Donald has been using Twitter as his weapon of choice.

So far, there have been no official moves made yet, but market watchers appear to be keeping close tabs on developments and what it could mean for geopolitical risks.

Major Market Mover(s):

USD

It was a volatile day for the Greenback as the currency made huge swings in reaction to updates from Washington.

USD/JPY dipped to a low of 111.73 then zoomed back up to a high of 112.70, USD/CHF climbed up to .9880 then retreated to a low of .9815, EUR/USD is up to 1.1931, and AUD/USD fell to a low of .7551.

CAD

The Loonie was still in a weak spot as crude oil bulls remained wary of the proposed June review of the OPEC deal and Russia’s role in the agreement.

USD/CAD popped up to a high of 1.2909, CAD/JPY is holding steady around 87.25, CAD/CHF hit a low of .7666, and EUR/CAD is up to 1.5342.

Watch Out For:

  • 11:30 pm GMT: Japanese household spending y/y (-0.2% expected, -0.3% previous)
  • 11:30 pm GMT: Japanese national core CPI (0.8% expected, 0.7% previous)
  • 11:30 pm GMT: Tokyo core CPI (another 0.6% reading expected)
  • 12:30 am GMT: Japanese final manufacturing PMI
  • 1:45 am GMT: Chinese Caixin manufacturing PMI (rise from 51.0 to 51.2 expected)
  • 5:30 am GMT: Australia commodity prices y/y (9.1% previous)