Article / 23 January 2017 at 8:00 GMT

Morning Markets: Dollar slides as Trump turns deaf ear

Former managing editor, TradingFloor.com / Saxo Bank
Denmark

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Watchlist

  • UK: Prime minister Theresa May speaks     (time not confirmed)
  • EU: ECB president Mario Draghi speaks     (1130 GMT)
  • Eurozone: Consumer Confidence Indicator  (1500 GMT)


It's barely three days since Donald Trump took the keys to the oval office, but dollar is already on the slide as the hoped for clarion call for the great reflation trade is yet to come.

Trump rushed through a raft of executive orders over the weekend including taking the US out of the Trans-Pacific Partnership but has become reticent on his plans to launch a $1 trillion financial stimulus package of infrastructural spending casting some doubt on the dollar and equities rally of the last 10 weeks.

USDJPY was the biggest mover sliding towards the 113.0 handle and pushing Nikkei down more than 1%. EURUSD was back at the 1.0750 mark, GBPUSD was above 1.2450 and USDCNH continues to look more of a threat to 6.80 than 6.90. With little to move the needle Monday, the trend is likely to continue for the day at least.

How Trump's failure to elaborate on his spending plans plays out on equities through the Monday session is anyone's guess but some downside looks likely after the major US indices in particular had initially responded relatively positively to the new president's confrontational inauguration speech Friday.

Safe-haven buying is already on the rise with gold's rally — sparked by Trump's non-committal press conference on January 11 — continuing unabated. Buying of 10-year Treasury bonds in Australia might also be the harbinger for a bit of safe-haven demand throughout the globe too after US 10-year yields also fell three basis points.

UK prime minister Theresa May could be the first foreign leader to get a real grasp on what Trump actually wants when she flies to Washington this week. Her hand — already dramatically weakened by the Brexit vote last June — will not have been helped by the breaking scandal this weekend of a nuclear missile test that went badly wrong in the summer and took an about-turn to head towards the US mainland.

While it's safe to say that on this occasion at least, this was not intended as a broadside across the bows of Trump's vessel, there will be some tough talking to come. A rude awakening for prime minister May most likely awaits.

Market signals

Asian session

  • Oil prices have risen, driven by signs of market tightening and USD weakness
  • Key Opec nations are not worried by Trump's vow to curb dependence on oil imports
  • US Treasury yields gave back some gains Friday after Trump's speech
  • Asian markets opened mixed; the Nikkei and ASX were down and the Kospi was up
  • Japan's Nikkei 225 took a tumble; it closed down 1.29% at 18,891.03
  • China's Shanghai Composite was up 0.23% to 3,130.26 at 0610 GMT
  • India's S&P BSE Sensex was up 0.2% to 27,088.03 at 0638 GMT
  • Korea's Kospi Composite clawed its way into the green after wild swings
  • The Kospi Composite was up 0.14% to 2,068.53 at 0627 GMT
  • The S&P/ASX200 headed sharply lower; it closed down 0.77% at 5,611.00
  • Logistics giant Brambles dragged the S&P/ASX200 lower; gold miners defied the slide
  • President Trump has taken the US out of the Trans-Pacific Partnership
  • Australia is working ahead with the TPP, even without the US

Forex ahead

  • The yen strengthened further with USDJPY slipping below the ¥114 handle
  • USD was worth just ¥113.2760 at 0639 GMT
  • The Australian dollar held above 0.75; it was worth 0.7576 at 0640 GMT
  • The NZ dollar edged above 0.72; it was worth 0.7211 at 0640 GMT

From the Floor

Bully-boy politics. "The fear is that this aggressive stance is going to trigger some kind of global trade war and that is not dollar supportive," says Hardy.

Breaking gold. "We need to break above $1,220/oz and then $1,230/oz is the next level," says Hansen.

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1..2..3
Today's main event is the Eurozone consumer confidence indicator for January, with expectations for a slight pullback, writes James Picerno.

S&P/ASX200 down on downgrade
A downgrade by supply chain logistics company Brambles dragged Australia's benchmark S&P/ASX200 index lower today,
write Saxo's Sydney trading team.

Playing safe
Asian markets took nothing out of President Trump's inaugural speech other than risk aversion - and headed for safe haven assets, says the Saxo APAC Sales Trading team.


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 Even without the US, the Trans-Pacific Partnership still makes up a formidable free trade bloc, with such key economies as Japan (above), Canada, Mexico and Australia. Photo: iStock

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