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Video / 25 January 2018 at 8:32 GMT

From the Floor: 'It's all about the dollar' — #SaxoStrats

#SaxoStrats
   • Cable retreats from overnight highs above 1.43
   • Equities boosted by sharp USD decline
   • Oil rallies on 10th consecutive inventories draw
  
SaxoStrats
Michael McKenna

The re-pricing of the US dollar following US Secretary of the Treasury Mnuchin's comments talking up a weak dollar for trade purposes is the domiant trend across markets with equities, commodities, and forex all feeling the effects.

The weak dollar has cratered USDJPY and sent EURUSD to new heights, but perhaps the most unexpected major-currency outperformance has been seen in sterling with GBPUSD rising north of 1.43 overnight before pulling back to the 1.4250 area today.

Equities, meanwhile, are being broadly supported by the trend with Saxo Bank head of equity strategy Peter Garnry noting that a weak USD eases credit conditions and increases the value of foreign profits for US firms.

USDJPY:
USDJPY
Source: Saxo Bank 

Saxo commodities head Ole Hansen reports that the Bloomberg commodity index is at 2.5-year highs on the back of the stunning dollar drop, with crude oil notably bullish Wednesday in response to a 10th consecutive fall in US inventories.

"This is likely the last drawdown as we are now entering into the time when refinery demand typically slows," says Hansen.

For more on forex, the latest macro releases, stocks, gold, and HG copper, watch today's Morning Call in full.

USD
How low can it go? Photo: Shutterstock

Michael McKenna is head of editorial content at Saxo Bank

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