US Dollar Drops Against Euro on Concerns Towards Trump Speech

The US dollar weakened against the euro and other major peers on Tuesday, but managed to limit its losses as an index that tracks consumer confidence improved in February. The greenback’s decline followed nervous anticipation for Donald Trump’s address to Congress, in which the president expected to reveal more details on his tax reform plans.

Investors are concerned that Trump’s speech might disappoint the market by having a strong protectionist tone that focuses on domestic issues, instead of details on his plans to cut taxes. The president had made promises to lower corporate taxes during his election campaign, but he is yet to reveal an exact structure for his plans.

The US dollar’s rally since November 2016 was largely supported by expectations of tax cuts and fiscal stimulus under Trump’s administration, which makes the currency sensitive for his speech. The president’s address to Congress is due to happen at 02:10 GMT on Wednesday.

On the data front, the Conference Board said that its consumer confidence index rose to 114.8 in February, from 111.6 in January. The index is now at its highest level in 15 years, as consumers’ outlook for the short term improved on expectations of improving business environment. The index, which collected data up until February 16 for its latest reading, is compiled from a monthly survey.

Another data release disappointed investors today, as the US Bureau of Economic Analysis published its second estimate for gross domestic product in the fourth quarter of 2016, which showed weak growth. Gross domestic product rose at an annual rate of 1.9% in the last quarter, which compared to expectations of a 2.1% annualized gain.

Gross domestic product decelerated in the fourth quarter from a 3.5% growth in the third quarter of 2016, which the bureau attributed to a downturn in exports and an increase in imports. Lower federal government spending also contributed to the deceleration, according to the report.

EUR/USD traded at 1.0613 as of 16:35 GMT on Monday, from 1.0625 at 16:00 GMT, the pair’s highest level for the day. EUR/USD started the day at 1.0580.

The Dollar Index, which measures the performance of the US currency against a basket of its main counterparts, dropped to 100.92 as of 16:30 GMT today, from 101.13 yesterday.

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