The dollar fell across the board and gold rallied as risk aversion in the markets increased demand for safe haven assets after news that the US House of Representatives failed to pass legislation that would reform the American healthcare system.
Repealing and replacing Obamacare was one of Trump’s major election campaign promises and his inability to pass the new healthcare bill is raising concern on whether his other more important plans on tax cuts and stimulus measures will get executed smoothly.
The news that the House pulled the health care vote came out late on the US session on Friday, and thus Asian and European markets were only able to react today. This resulted in a big move in the dollar lower, as well as a drop in equity markets.
The dollar was sold against the yen to reach a fresh four-month low of 110.13 in late Asian session trading. The euro opened in Asia with a gap higher against the dollar at $1.0838 compared to Friday’s close at $1.0797. The single currency continued higher to last trade at $1.0869, the highest in more than four months.
The single currency was also supported by news of the CDU party’s victory in German regional elections. This is German Chancellor Angela Merkel’s party, and so its win in the western state of Saarland on Sunday boosted her prospects of winning a fourth term in September’s national election.
The pound rose against the dollar to reach a one-month high of $1.2550. While the weaker dollar was the main driver of sterling, political developments in the UK are still the main focus, especially as UK Prime Minister Theresa May is set to trigger Article 50 on Wednesday, to start the formal negotiations for the UK to leave the EU.
Despite the weaker greenback, the aussie was unable to gain much traction due to weaker commodity prices, such as iron ore, which Australia exports. AUD/USD consolidated after dipping on Friday below the key $0.7600 level, to trade between $0.7614 and $0.7636 in Asia today.
Oil prices remained under pressure on news of an increase in the US rig count according to the latest Baker Hughes data. WTI crude slid to $47.32 a barrel in Asian trading today while Brent fell to $50.25 a barrel.
Gold was helped higher due to the softer greenback. Since the start of trading today, prices rose from the $1245 an ounce area to as high as $1259.02 an ounce.
The major events for the day ahead include the release of the German Ifo Index and Fed speakers (Chicago Fed President Charles Evans and Dallas Fed President Robert Kaplan).