Market News & Insights
13 April 2017

Trump Dumps USD

For the most part, yesterday was rather quiet. Markets were content to chop in recent ranges, in one three hour period from noon to the US cash open, GBPUSD had a range of 10 pips while other pairs continued to consolidate in their own narrow ranges. In Europe equities edged higher, hovering around 16 months highs, while stateside in the US we saw selling into the close following comments from Donald Trump into the US close. Trump’s remarks sent the USD spiraling downwards, as he once voiced his view the USD was “too strong” and he would prefer if the Fed would keep interest rates at lower levels.

The comments from Trump caught markets unaware, EUR, GBP and JPY all surging between .75% to 1.05% against the greenback, as US treasury yields also plummeted. Trump also refused to label china a currency manipulator despite his number of comments in the past. While not direct wanton manipulation, Trump’s comments in themselves would be classed by many as just that. Up until that point the USD, having started the day lower, was in recover mode and clawing back ground but with Trump now sitting on the USD, will the USD bull run come to an end? Overnight risk remained off, Japanese equities pressed four month lows and the JPY breakdown below 110.00 accelerated.

Looking towards the Eurozone and as the first round of French elections rapidly approaches, some concern is beginning to mount that Macron may well be third in the running following a surge in support from the leftist Jean-Luc Melenchon. As this race heats up we are likely to see additional volatility in Euro pairs with the downside accelerating should Le Pen and Melenchon lead the first round. These are two extreme candidates with Le Pen on the hard right and Europe and France likely need more stability than either can offer, that’s not a personal view, that is the view of the market and as such, gospel for the Euro.

German CPI for March crossed the wires earlier, posting price growth of 1.5% as expected and unchanged. EURGBP is pressing lower once more, just above key support around .8465 we’ve highlighted, .8510 offers resistance to the upside. EURUSD now finds support at 1.2480, with seller’s lines up now towards 1.0580 to 1.0610.

Looking towards the US and we’ll be entering thin trading condition ahead of the holiday weekend. Jobless claims and U. of Michigan Consumer confidence. Broader risk sentiment remains key, North Korea are expected to once again test the US and China’s resolve with a missile “test” on Saturday. With holiday markets and very thin liquidity we may see some aggressive risk moves as a result. GBPUSD broke above the 200 day moving average for the first time since the Brexit referendum and if that holds, there may well be more upside for GBPUSD. 1.2600/1.2700 area still offers sellers opportunity and with Brexit uncertainty, and declining data, the UK is far from out of the Brexit doldrums.