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How will the dollar behave at the start of this week on political dramas?

  • Flynn has since entered a plea deal.
  • The 4th December is the "absolute deadline for PM May.
  • Two main factors to potentially re-establish a bullish opening day for the greenback?

Last week was driven by political factors, but has the market been misled on the Flynn headlines and will the greenback become a proxy 'offer' in the Europen markets?

  • Market wrap: political headlines drove the action (Flynn pleaded guilty) - ANZ

The DXY closed at 92.90 spot on Friday, losing the 93 handle with a low in the 92.50's. As reported last week by FXStreet editor Eren Sengezer, on Friday morning, Michael Flynn, Trump's ex-national security adviser, was taken into custody after he pleaded guilty to lying to the FBI during the investigation of Russia's involvement in the 2016 presidential election. 

  • US Tax and Budget Policy in focus this week - Nomura

"Following this development, Brian Ross of ABC News reported that Flynn was ready to cooperate and was prepared to testify that as a candidate, Donald Trump had directed him to make contact with the Russians", Eren wrote.

However, there seems to be a mix-up here given that ABC news failed to highlight that Flynn was instructed to contact Russia AFTER the election, so this has misled traders into shorting the greenback to some extent, (ABC news have now suspended news presenter Brian Ross over inaccuracies in his original Flynn report.)

However, Flynn has since entered a plea deal with an inquiry into the alleged collusion with Russia, so perhaps there is still reason to stay clear of the greenback while we wait to hear what information Flynn is cooperating with the inquiry upon.

Meanwhile, the final draft of the tax reform bill passed by the Senate on Saturday by 51 votes to 49, which is bullish while we await the Senate to merge its legislation with the House of Representatives before it can be signed into law by the president.

The Brexit saga continues

Then, across the pond, and remembering what Tusk said week ago, that "the 4th December is the "absolute deadline for PM May to improve her Brexit divorce offer or face failure in persuading EU leaders to open trade talks,"  Mrs May is expected to lodge a new offer which is believed to be in the region of £40bn in a bid to move the Brexit talks on to sorting out a trade deal. We also await the outcome of Barnier's meeting at 10.00 GMT on Monday with the EU legislature's Brexit team to find out if there is indeed going to be a deal made on citizens' rights.

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