Dollar Tumbles on Flynn Resignation, Yellen Testimony

The U.S. dollar tumbled against other major currencies on Tuesday, as investors remained focused on Federal Reserve Janet Yellen’s testimony today and the resignation of national security advisor Michael Flynn.

The euro increased by 0.2%, but the pound slid 0.5% after inflation numbers failed to meet expectations.

Currency moves on Tuesday morning pushed the dollar index down from a three-week high, down 0.2%.

Investors are shifting forex trading and CFD strategies amid heightened concerns that Flynn’s resignation will lead to a less cohesive administration, diminishing hopes of Trump’s “phenomenal” tax reform plan coming to fruition.

The prospect of higher inflation has fueled speculation of further interest rate hikes this year. Yellen’s testimony before Congress has dampened expectations of an increase next month.

Robert Kaplan, Dallas Fed President, said on Monday that the central bank should raise rates soon, or it may risk abandoning its plan to increase rates slowly.

The Fed earlier projected three rate increases this year.

The greenback slid against the Canadian dollar ahead of Yellen’s testimony. The dollar fell to a low of 1.3025 against the loonie before settling at 1.3040.

The loonie remains under pressure after Prime Minister Justin Trudeau’s meeting with U.S. President Donald Trump. In a joint press conference, Trump said the United States would “tweak” its trade relationship with Canada.

The dollar was weaker against the yen, with USD/JPY falling 0.36% to 113.31. The yen gained support after Japan’s Prime Minister Shinzo Abe said he agreed with U.S. President Trump that currency issues should be discussed among finance leaders of each country.

The greenback gained against the pound, with GBP/USD reaching a low of 1.2445 ahead of the UK’s inflation report.

The euro gained 0.18% against the dollar to trade at 1.0617. The currency was also 0.7% higher against the pound after the UK Office for National Statistics released a disappointing inflation report.

Although consumer prices rose at the fastest pace in three years, investors remain concerned that sharp rises in costs will hinder British producers.

The single currency benefited from a weaker dollar, but remained under pressure over concerns of France’s presidential election and Greece’s bailout talks.

Data on Tuesday also showed that Germany’s economy expanded by 0.4% in the fourth quarter, missing expectations.

Elsewhere, the Russian ruble climbed. The oil-driven currency increased by 1.1% to 57.3548 per dollar.

The currency’s increase was driven by a raise in oil prices, as Brent crude jumped 1.1% to $56.19 per barrel.