Dollar Turn

21 November, 2016

The relentless rise of the dollar that started hours after Trump’s election victory continued on Friday, failing to succumb to any profit-taking pressures towards the end of the week. For EURUSD, that marked the longest consecutive steak of losing days for the single currency since the start of the euro back in 1999. Of course, the rally is certainly not without legs, the prevailing thinking being that the US central bank is due to raise rates in December and probably at least a couple of times next year at the same time that the new administration pushes ahead with plans for fiscal expansion. The budgetary fear of this can be seen on bond yields, which have risen substantially since Trump’s election victory. The old adage holds true in FX, namely that nothing lasts forever. This holds true for the relentless rise of dollar, so some sort of corrective activity is almost sure to be seen this week and has already been seen during the Asia session, the dollar index reversing around one-third of a percent so far.

In other news, former French President Sarkozy was knocked out of the first round primary to find the next Presidential candidate, which can be viewed as another knock for the ‘establishment’. Politics will not slip far down the agenda, with the Italian constitutional referendum approaching next week, which the prime minister has stacked his political career on. There are no major data releases for the start of the week, with the focus on some central bank speakers later in the day, including ECB President Draghi at 16:00 GMT. Fed’s Fisher also speaks at 13:00 GMT.

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