U.S. Dollar Recovers Ahead Of Trump's Tax Reform Announcement

The U.S. dollar trimmed its early losses against its major rivals in early deals on Wednesday, as investors await details over the U.S. President Donald Trump's tax reform plans, expected to be announced later in the day.

Trump administration expects that its promised tax overhaul would accelerate the pace of economic growth above 3 percent.

Trump's plan calls for taxing small business owners and corporations at the same 15 percent rate. Small businesses and public corporations are currently paying tax rate of 39.6 percent and 35 percent, respectively.

Trump proposes to cut repatriated offshore earnings to 10 percent from the current 35 percent, in a move that would benefit those US multinational companies that have more than $2.6 trillion in earnings abroad.

The U.S. economic data proved to be a mixed bag on Tuesday, with consumer confidence pulling back more than expected in April, whereas new home sales increased substantially in March.

The European Central Bank meets on Thursday, but no changes to asset purchases or interest rates are expected. It will be interesting to hear President Mario Draghi's comments for any shift in tone. The Bank of Japan is also expected to keep its policy stance intact at the two-day rate review ending on Thursday.

The greenback showed mixed performance in the Asian session. While the greenback declined against the franc and the euro, it rose against the yen. Against the pound, it held steady.

The greenback firmed to 111.51 against the yen, its strongest since April 10. The next possible resistance for the greenback-yen pair is seen around the 112.00 region.

Data from the Ministry of Economy, Trade and Industry showed that Japan's industrial production rebounded at a faster-than-expected pace in February on back of strong industrial production.

The all industry activity index climbed 0.7 percent month-over-month in February, reversing a 0.4 percent drop in January. Economists had expected a 0.6 percent increase for the month.

The greenback edged up to 0.9950 versus the Swiss franc, 1.2805 against the pound and 1.3585 against the loonie, from its early lows of 0.9919, 1.2843 and 1.3557, respectively. If the greenback extends rise, it may target resistance around 1.02 against the franc, 1.27 against the pound and 1.38 against the loonie.

The greenback strengthened to a 2-week high of 0.7489 against the aussie and a 1-1/2-month high of 0.6894 against the kiwi, off its previous lows of 0.6956 and 0.7552, respectively. The greenback may locate resistance around 0.73 against the aussie and 0.67 against the kiwi.

The greenback, having fallen to a 5-1/2-month low of 1.0951 against the euro in the Asian session, reversed direction and rose to 1.0896. On the upside, 1.075 is likely seen as the next resistance level for the greenback.

Looking ahead, Canada retail sales for February and U.S. crude inventories data are set for release in the New York session.