The strong start of the new US presidency makes USD softer

24 January, 2017

So this is how Donald Trump’s first day in office looks like. He has easily made it to the headlines, In his first executive orders he confirmed that NAFTA will be renegotiated and that the US no longer applies for the TPP. He was supposed to be keen on protectionism and such decisions were no surprise. And yet the pace at which he is reshaping the US trade ties has caused volatility not only on CAD and MXN directly affected by the news on NAFTA but also caused a broad risk aversion, with US equities down and JPY appreciation. 

The dollar is enduring losses worth 0.5% on a trade weighted basis, particualrly against the yen (1.37%) and the British pound (0.95%).

This decline of USD value has boosted precious metals with Gold price higher 0.53% today and preparing to attack the top of its recent range. Oil failed to move higher though burdened with the surge of US active oil rigs last week and not much added by the OPEC moitoring committee to what the market already knew about the implementation of the output cut deal.

The negative sentiment due to the US political uncertainty may have also played a role. This can be seen in the behavoir of major stock exchanges today. UK100 (-0.66%) slipping back towards the 7000 level. The DE30 (-0.73%) was also selling off and US500 down -0.45%. The US earnings season is already two weeks into and this week sees big tech firms report which may add more spice to the market moves.

GBP was the second strongest currency amid G10 today for a reason. One of the key events this week is tomorrow’s UK Supreme Court decision on the Brexit vote. The baseline scenario is a verdict that the Parliament has the final word when it comes to annoucning that Art.50 is triggered by the UK. Will the pound see an episode of ’sell the fact’ when the decision is out at 9:30 am GMT? 

Looking ahead to tomorrow the main event is the UK Supreme Court ruling on the appeal regarding the triggering of Article 50. This is expected to be announced shortly after 09:30. Before that we have Eurozone manufacturing figures with the main release coming at 09:00. The afternoon sees US existing home sales out at 15:00 which is expected to show a fall to 5.54M. 


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