The dollar retreated from a 6-week high on Wednesday as analysts began to speculate on who U.S. President Donald Trump would choose to be the next Federal Reserve Chair. According to some reports, U.S. Treasury Secretary Steven Mnuchin has thrown his support to current Fed governor Jerome Powell instead of former governor Kevin Warsh, although Powell is known for being markedly less hawkish than Warsh. The dollar, which had risen on speculation earlier this week that Warsh was the frontrunner, was down 0.22 percent against the euro as of 12:04 p.m. HK/SIN, to trade at $1.1768. The dollar was also down against the yen, trading at 112.63.
Also weighing on traders’ minds is President Trump’s tax reform proposal, which seems to be facing continual challenges both from within the Republican party and from Democrat detractors. Last week, Senator Bob Corker (Tenn-R) said that he would not vote for any bill that does not significantly reduce the deficit, which the current tax bill does not. Treasury Secretary Mnuchin maintains that increased growth supported by tax cuts will help pay down the national debt by $1 trillion. Detractors argue that this claim has not yet been substantiated.
The British pound has also struggled in recent trading sessions due to political uncertainty related to Brexit preparations. Brexit minister David Davis inormed the Conservative Party conference on Tuesday that Britain wants to negotiate an exit agreement with the EU but would be willing to walk away without a deal, creating feelings of uncertainty over the country’s future. The sterling has declined more than 10 percent against the dollar since last June’s Brexit vote. Traders are now watching the purchasing managers’ index (PMI) survey in Britain’s dominant services sector which is due today at 8:30 a.m. GMT to look for signs of possible economic improvement that can strengthen the pound.