Market News & Insights
9 January 2017

Dollar to Look to Trump

The USD managed a rally on Friday despite weaker than expected NFP figures, the real driver for USD strength was the rise in wage growth but once again, for me, US data is not as strong as market appears to be pricing for the USD and market appears happy to sell into USD rally’s as well. GBP has struggled for the last week as Brexit movements have knocked sterling confidence, once again it appears it is the hard line being taken by the UK Government, with reports over the weekend suggesting PM May would favour leaving the single market in order to have full control over immigration resulting in GBPUSD falling to the lowest levels since October, while EURGBP is back trading towards December’s highs.

May’s comments, although deemed as quite aggressive, once again form part of the political posturing we’ve seen since the Brexit vote but the primary point for now is that we are still no clearer on what path the UK will be taking with Article 50 and until that is clear, we expect GBP to remain volatile and open to sudden bouts of buying and selling as sentiment dictates. Overnight markets opened on a positive note but some selling later into the session meant gains were limited, with the S&P/ASX 200 up close to 1% the out-performer. JPY faced some selling amidst the positivity but the safe haven currency has recovered somewhat since Europe has come online.

Donald Trump is due to speak on Wednesday and markets across the globe will have a keen eye on what the President of the United States will have to say on policy, especially around global trade and in relation to China etc. The transition of the new president has been anything but smooth as Trump tries to fill positions at haste and little has been seen or heard from Trump since his shock victory and many are eagerly awaiting to see exactly how he intends on delivery his policies. There is a huge amount of questions still circulating and there is little doubt that Trump will not have everything his own way as even several house Republicans have already opposed some of his suggestions. The data calendar is light but there are several Fed speakers due across the wires today so we’ll have an eye on them for any leads into USD. EURUSD currently trading towards the top end of its recent range, sellers continue to line up above 1.0600 driving the price back lower, while support just above 1.0500 offers some light demand for Euro buyers, with lows below 1.0400 the line in the same for now. GBPUSD is down over 1% already today and looking to test support towards 1.2080/1.2115 area which marks the lows from October/November.