Talking Points:
- Australian Dollar gains as “Trump trade” retraces across markets
- British Pound corrects lower following surge to a three-month high
- Trump cabinet appointments may reboot post-election trend moves
The Australian Dollar outperformed in overnight trade as US Treasury bond yields retreated, suggesting the move reflects continued digestion of the so-called “Trump trade”. The Aussie faced heavy selling pressure in the aftermath of the US presidential election amid speculation that grandiose fiscal stimulus championed by the President-elect will ramp up inflation and steepen the Fed rate hike cycle. This fueled a market-wide reallocation of portfolios over the past two weeks.
A lull in top-tier news-flow driving the post-election narrative this week appears to be offering stretched markets an opportunity for corrective retracement (as expected). The rates-sensitive Aussie appears to have capitalized accordingly, with the similarly higher-yielding Canadian Dollar following suit. Firming risk appetite across Asian bourses – where shares followed Wall Street upward – probably helped offer a lift to commodity-bloc currencies.
The British Pound faced broad-based selling pressure. A discrete catalyst for the move is not readily apparent. The move may have been corrective after yesterday’s sharp advance that brought the UK unit to the highest level in almost three months against an average of its top counterparts. Follow-through may prove limited however as traders withhold direction conviction ahead of the upcoming release of the UK Autumn Budget Statement.
Looking ahead, another quiet day on the European and US economic calendars opens the door for retracement of “Trump trade” moves to continue. This dynamic may be disrupted if the incoming US President unveils key appointments to the economic policy wing of his cabinet, with particular attention paid to who will be the next Treasury Secretary. The selection of a person that the markets deem reliable and capable of delivering on the incoming administration’s platform may reboot post-election trends.
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Asia Session
| GMT | CCY | EVENT | ACT | EXP | PREV |
|---|---|---|---|---|---|
| 22:30 | AUD | ANZ Roy Morgan Weekly Consumer Conf | 115.5 | - | 118.2 |
| 5:30 | JPY | Nationwide Dept Sales (YoY) (OCT) | -3.9% | - | -5.0% |
| 5:30 | JPY | Tokyo Dept Store Sales (YoY) (OCT) | -4.4% | - | -3.4% |
European Session
| GMT | CCY | EVENT | EXP | PREV | IMPACT |
|---|---|---|---|---|---|
| 7:00 | CHF | Trade Balance (OCT) | 3.88b | 4.37b | Medium |
| 7:00 | CHF | Exports Real (MoM) (OCT) | - | 4.3% | Low |
| 7:00 | CHF | Imports Real (MoM) (OCT) | - | -3.3% | Low |
| 7:45 | AUD | RBA's Kent Speech at ABE Event in Sydney | Low | ||
| 9:30 | GBP | Public Finances (PSNCR) (OCT) | - | 13.3b | Low |
| 9:30 | GBP | Central Government NCR (OCT) | - | 22.5b | Low |
| 9:30 | GBP | Public Sector Net Borrowing (OCT) | 6.0b | 10.1b | Low |
| 9:30 | GBP | PSNB ex Banking Groups (OCT) | 6.0b | 10.6b | Low |
| 11:00 | GBP | CBI Trends Total Orders (NOV) | -8 | -17 | Low |
| 11:00 | GBP | CBI Trends Selling Prices (NOV) | - | 8 | Low |
| 11:30 | GBP | BOE's Kristin Forbes Speaks in London | Medium | ||
| 15:00 | EUR | Eurozone Consumer Confidence (NOV A) | -7.8 | -8 | Low |
Critical Levels
| CCY | Supp 3 | Supp 2 | Supp 1 | Pivot Point | Res 1 | Res 2 | Res 3 |
|---|---|---|---|---|---|---|---|
| EUR/USD | 1.0479 | 1.0549 | 1.0590 | 1.0619 | 1.0660 | 1.0689 | 1.0759 |
| GBP/USD | 1.2043 | 1.2241 | 1.2368 | 1.2439 | 1.2566 | 1.2637 | 1.2835 |
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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