he US President has been pushing hard for a repeal of Obamacare since his inauguration in January. However, news that the Senate failed in its efforts to pass Trump’s healthcare replacement overnight on Tuesday further called into question the President’s ability to push through any sort of policy changes in the US. With two additional senators claiming they would not support the bill, Trump fell short of the votes needed to pass the act and it is likely to be put on the backburner until the next Congressional session at the very earliest.

Dollar traders took a dim view of the news, selling the currency hard during both Asian and London trading on Tuesday. Trump’s inability to force through any sort of policy, combined with dampened expectations of another interest rate hike by the Federal Reserve this year have hit the Dollar hard in the past few days, with the Dollar index now extending its losses to around 2% in a little under two weeks.

Bank of England hike chances dealt a blow after inflation miss

The chances of a sooner-than-expected interest rate hike from the Bank of England were dealt a fairly significant blow on Tuesday following the release of the latest inflation data in the UK. Consumer prices grew by just 2.6% last month compared to the 2.9% consensus. The drop was largely due to a decrease in petrol and diesel prices although the core index, which strips out volatile components such as fuel, also declined to 2.4% from 2.6%.

While inflation remains comfortably above the Bank of England’s 2% target, the chances of additional dissenters at next month’s MPC meeting have been severely dampened. We now think it is unlikely any other dissenters will join Ian McCafferty and Michael Saunders in voting for an immediate rate increase when policymakers next convene on 3rd August.

Next up for Sterling will be today’s UK retail sales data and of course Thursday’s ECB meeting, where recent resilience in the EUR/GBP rate will be put to the test. News out of the Euro-area economy on Wednesday looks particularly light on the ground with construction output data this morning the only release on the docket.

Aussie Dollar soars after upbeat RBA message

Away from the major G3 currencies, the main mover of the day was by far and away the Australian Dollar. The currency soared by over 1.5% against the USD at one stage to its strongest position in two years against the flagging greenback after a very upbeat economic assessment from the Reserve Bank of Australia. The minutes of the central bank’s July meeting noted the strength of the country’s labour market, while acknowledging an improvement in global economic conditions, suggesting that markets may be wrong in discounting the possibility of an RBA rate hike in 2017.