Article / 23 January 2017 at 22:36 GMT

US Market Wrap: Headlines knock US dollar to the floor

FX Trade Strategist / www.Loonieviews.net
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Watchlist:

  • Japan: Nikkei Manufacturing PMI (preliminary) 0030 GMT 

US Data released:

  • Nothing of note 

A couple of late afternoon headlines torpedoed the US dollar in thin afternoon trading. A headline flashed across Reuters stating that Treasury Secretary nominee Steven Mnuchin says "excessively strong US dollar negative in short term". A little bit earlier another tape bomb led to USDCAD taking it on the chin at the end of the day. 

Blackstone Group Chairman Stephen Schwarzman, a Trump advisor, spoke to reporters in Calgary. “I don’t think [Prime Minister Justin Trudeau] should be enormously worried,” Schwarzman said. “Canada is held in very high regard. We have balanced trade between the US and Canada and that’s not the kind of situation where you should be worrying.”. 

USDCAD touched 1.3223 on the news.
 
The day started with the dollar on the defensive. Post-election optimism from fiscal stimulus talk morphed into protectionism pessimism. President Trump officially took the US out of the Trans-Pacific Partnership on January 23. The move was merely making good on a promise, but it still managed to cause a minor ripple of risk aversion in forex markets.

EURUSD see-sawed between 1.0705 and 1.0750 and finished the session back at 1.0740, which is where it opened.

Sterling rallied from 1.2426 to 1.2507, still supported by UK PM Theresa May’s promise of a parliamentary vote on Brexit and ahead of Tuesday’s UK Supreme Court decision on the necessity to have such a vote. Profit taking may have added to GBPUSD support.

Yen traders were nervous. USDJPY rallied to ¥114.07 when equity trading began. But the move was shortlived and USDJPY dived to ¥112.76 on a mix of falling Treasury yields and a soft tone to equity prices.

The commodity currency bloc shrugged of an early bout of US dollar strength around mid-morning and managed to rally for the rest of the day. Negative US dollar sentiment was behind the move.

WTI prices shrugged off an early morning dip to $52.18/barrel and climbed to $53.06/b just after lunchtime in New York on Monday, but couldn’t hold onto the gains. Iraq’s oil minister Jabar al-Luaibi said that “We are in agreement with most international oil companies, not all of them, that they will be in line with us. This is going well”, according to a Reuters article.

US equity indices declined marginally with traders taking their cue from the soft US dollar and appeared content to await further details from President Trump on his stimulus plan.

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 WTI climbed to $53.06/b in New York but couldn’t hold onto its gains, despite encouraging comments from Iraq’s oil minister that should have supported prices. Photo: iStock


– Edited by Robert Ryan

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

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