USD: This isn't a Trump trade rethink – ING
|A large portion of the election move in the US Dollar (USD) has been unwound. That looks more like a positioning adjustment rather than a rethink of what a Trump presidency means for global markets. Remember that markets got to Election Day broadly pricing in a Trump victory, and while the USD spiked in reaction to the Republican clean sweep, there are perhaps some questions now on how far the USD can rally near term given the focus is shifting back to the macroeconomic discussion, ING’s FX analyst Francesco Pesole notes.
USD remains in a strong position
“The Fed cut rates by 25bp yesterday, in line with market expectations and consensus. The FX market was very marginally impacted and so was the rates market. If anything, we saw a very brief firming in the USD and a small rise in yields when Chair Jerome Powell seemed to suggest a more upbeat outlook for the US economy. Ultimately, markets were seeking any indication that Powell might tweak the narrative on the back of the US election, but there was understandably no indication of that.”
“The USD remains in a strong position from a rate perspective. The two-year USD swap rate is near the 4% handle, and we probably need to see some worsening in US data sentiment for markets to take that back lower.”
“We are in an adjustment phase after the US election moves, and with volatility falling there are some potential pockets of opportunity for pro-cyclical currencies that offer attractive yields to do well in the near term. In that sense, the AUD appears well positioned as markets incidentally don’t see the impact of US protectionism as a near-term threat and Beijing stimulus can help some China proxies.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.