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(Bloomberg) -- A second day of gains kept the dollar on track for its biggest weekly advance this year even after a report that President Trump favors Jerome Powell for Federal Reserve chair slowed the greenback’s advance.

The Bloomberg dollar index rose to its highest since July 7 and was on track for a weekly gain of more than 1 percent after an advance estimate showed the U.S. economy expanded at a stronger-than-expected 3 percent pace in the third quarter. Dollar gains were pared and Treasuries jumped to highs after the report on Powell, who is seen as a relatively dovish candidate. Bund futures surged and euro-yen fell after Spain’s government said it would move to restore sovereign rule in Catalonia.

  • Even after paring gains, the USD was up against its most of its G-10 counterparts, with the strongest advance against EUR. The Bloomberg dollar index rose more than 0.4% after the GDP report before settling back down to a gain of ~0.2% following the report on Powell, who is seen as more dovish than rival candidate John Taylor
  • The dollar could push further if U.S. tax reform moves ahead quickly now that the House has approved a budget resolution. The GDP report showed few signs of hurricane effects, and “consumer spending held up relatively well, supported by the spike in auto sales related to the replacement of damaged and destroyed vehicles,” CIBC economist Royce Mendes said in a note to clients
  • The euro was on a defensive footing and lower vs all major peers as investors adjusted sentiment and positions to a new outlook following the ECB decision Thursday. The central bank will extend its asset purchases at least through September 2018 at the reduced monthly pace of EU30b, a more dovish outcome than some expected. The Spanish political crisis lurched forward, as Catalonia’s parliament voted to declare independence, while Spanish lawmakers gave PM Rajoy the power to oust the rebel leaders
  • EUR/USD touched a fresh three-month low of 1.1576 as it returned to its weakest level of the day after briefly rebounding to above 1.1600 on the Fed succession report. The euro, which is on track for its worst weekly showing in almost a year, breached technical support at the July 18 high 1.1583
  • USD/JPY fell to a fresh daily low at 113.71, tracking the drop in Treasury yields after the Fed report. The USD rose to 114.45 after the GDP data, its highest since July, before offers capped the pair ahead of technical resistance. USD bulls are mindful that USD/JPY has struggled to maintain its footing on a 114.00 handle despite a rise in Treasury yields
  • USD/CAD was trading near 1.2872 in its seventh straight advance. The pair briefly reversed all losses since the BOC began removing accommodation on July 12, rising as high as 1.2917

To contact the reporter on this story: Dennis Pettit in New York at dpettit5@bloomberg.net.

To contact the editors responsible for this story: Benjamin Purvis at bpurvis@bloomberg.net, Greg Chang, Elizabeth Stanton

©2017 Bloomberg L.P.

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