Dollar holds breath waiting for Trump health updates, fiscal package

LONDON: The dollar index slipped slightly on Monday but was little changed from Friday's close as financial markets waited for news about US President Donald Trump's health and developments in fiscal aid talks in Washington.

Trump said on Friday that he had tested positive for COVID-19, triggering investor flight to safer assets and a stock market sell-off.

But early in the Asian session, Trump made a surprise appearance in a motorcade outside the hospital where he is being treated, which helped improve risk appetite.

He could be discharged from the hospital today, according to his doctors.

"FX traders cannot agree on how to interpret the recent news flow," Ulrich Leuchtmann, Commerzbank's head of FX and commodity strategy, said.

"The biggest issue for the FX market is: it is uncertain whether this has made the biggest risk of the U.S, elections - a long political and legal battle about the result - any more or less likely," he said.

"A battle of this nature is only likely if the contender Joe Biden wins," he added. "That might have become more likely."

Investors are also waiting for developments in talks in Washington about a coronavirus relief package after US House Speaker Nancy Pelosi on Sunday reported progress i the discussions.

"Concrete developments have been thin on the ground and we doubt investors will want to chase risk assets until more clarity has emerged," ING strategists said in a note to clients, adding they expected the dollar index to trade in tight ranges.

The dollar slipped slightly against a basket of currencies, but its index held close to recent ranges, down less than 0.1pc on the day at 93.785 at 0650 GMT.

Dollar-yen rose 0.3pc to 105.615 at 0659 GMT, recovering from its sharpest fall in more than a month on Friday.

Riskier currencies strengthened overnight but these gains abated by the time European markets opened.

The Australian dollar was up 0.2pc at 0.71735, while the New Zealand dollar was down 0.1pc at 0.6641.

The Reserve Bank of Australia's policy meeting and the Australian budget announcement are on Tuesday.

Coronavirus restrictions in Auckland will be lifted this week, New Zealand Prime Minister Jacinda Ardern said.

The euro was up 0.1pc at $1.17260 at 0712 GMT.

The safe haven Swiss franc was up, lifted by Japanese tech firm NEC saying it will buy Swiss financial software company Avaloq Group AG.

At 0702 GMT, euro-Swiss was down 0.2pc at 1.07620.

Euro zone final PMIs for September are due at 0800 GMT.

British Prime Minister and the head of the European Union's executive, Ursula von der Leyen, agreed in a phone call on Saturday to step up negotiations on a post-Brexit deal, as the Dec. 31 deadline approaches.

The pound was at $1.2917 at 0721 GMT, down 0.2pc on the day.

In focus this week are the US Federal Reserve's meeting minutes due on Wednesday and European Central Bank meeting minutes follow on Thursday.

Flash estimates for annual euro zone inflation came in weaker than expected on Friday, raising pressure on the European Central Bank to increase its stimulus.