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Equity markets have been hit hard by political risk emerging from the strange spectacle of Donald Trump's White House, and more risk lies ahead as those political worries are not about to vanish, Saxo Bank's chief economist Steen Jakobsen says.
Article / 19 June 2017 at 22:11 GMT

US Market Wrap: Dudley does right for interest rate hawks

FX Trade Strategist / www.Loonieviews.net
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Watchlist:

  • Australia: House Price Index (0030 GMT) 
  • Australia: RBA meeting minutes (0130 GMT) 

US data released:

  • Nothing of note 

There was a dearth of data releases in the US but traders must trade so they searched for inspiration elsewhere. They found it close to home. New York Fed President William Dudley painted a rather upbeat outlook for the US economy. He said "I am very confident" that economic expansion "has quite a long ways to go". For a noted dove, those are rather hawkish words.

At least that’s how FX traders saw it today. EURUSD peaked at 1.1212 early in the session and declined steadily to finish the day at 1.1148.

USDJPY rallied from 110.91 to 111.44 by the New York close boosted by Dudley’s comments and higher US yields. Russia’s threat to target US warplanes in Syrian airspace didn’t even cause a ripple of risk aversion demand for yen.

GBPUSD followed EURUSD lower, falling from 1.2803 to 1.2725. The start of what will be a long drawn-out Brexit negotiation may have contributed to sterling’s weakness.

Broad US strength undermined the antipodean currencies. The New Zealand dollar was the worst performing currency on Monday. Traders may have been a tad nervous ahead of Tuesday’s GlobalDairyTrade auction and Thursday’s Reserve Bank of New Zealand meeting.

Oil traders were more skittish than usual. WTI opened at $44.89, near the day’s high of $45.03/b and then started to slide by mid-morning. There wasn’t any fresh news so traders fretted about increased supply from Nigeria, Libya and the US and sold crude. It finished the day at $44.15/b.

US equity indices posted new record highs. Traders hear Dudley talking a hawkish game and ignored him. Tech stocks led the way.

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 Send in the bulls ... hawkish comments from the New York Fed President provided US dollar bulls with all the ammunition they needed to buy US dollars. Photo: Shutterstock

Opinion:

US President Donald Trump poses a lot of risks to an otherwise optimistic European economic outlook, writes Saxo Bank Head of Macro Analysis Dembik Christopher in: Navigating the market this summer.

– Edited by Gayle Bryant

Michael O'Neill is an FX consultant, currency strategist and author of the Trade of the Day at Loonieviews.net. Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.

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