FX Focus: Dollar struggles ahead of Donald Trump's first Congress speech

The dollar continued its pattern of erratic trading on Tuesday (28 February), ahead of Donald Trump's first appearance before Congress this evening.

The greenback, which has struggled for direction for most of the past two weeks, gained 0.13% against and the Canadian dollar, trading at CAD$1.3197, but shed 0.40% and 0.49% against the Swiss franc and the yen respectively, fetching CHF1.0050 and ¥112.15. The dollar was also 0.11% lower against the euro, trading at 0.9436 cents but remained largely flat against its Australian counterpart at AUD$1.3028.

"Although sentiment towards the United States is firmly bullish and domestic data continues to display signs of economic stability, the dollar remains pressured," said FXTM research analyst Lukman Otunuga.

"Sellers have exploited the ongoing anxiety to limit gains on the greenback while the uncertainty over a March rate hike despite the rising odds have installed bears with further inspiration to attack prices."

The US president will address the Congress for the first time at 9pm (EST) (2am GMT on Wednesday) and his speech is expected to play a pivotal role in determining the direction the markets and the dollar will take.

Kathleen Brooks, research director at City Index, added: "Treasuries and FX [are] acting like Trump is bound to disappoint and the Fed will not hike rates as expected, while the equity market is more optimistic on Trump's pro-growth agenda.

"However, maybe equity traders think they can't lose – even if Trump doesn't deliver on his pro-growth agenda the Fed will be there to cushion the blow. To put it simply, equity markets are not acting like Trump is a threat."

On the British side of the Atlantic, the pound was struggling to recoup losses suffered in the previous session, when it recorded its biggest decline in more than a week amid worries over Brexit negotiations and rumours Scotland could hold a second independence referendum.

By early afternoon, sterling traded 0.23% lower against the dollar, exchanging hands at $1.2413, after falling below $1.24 in the previous session. The pound was down 0.22% against the euro, fetching €1.1721, as it remained some way off last week's high of around €1.19.