Talking Points:
- US Dollar edges higher as focus turns to Donald Trump’s inauguration
- Follow-through uncertain as markets grope for US fiscal policy details
- Aussie, Kiwi Dollars suffer outsized losses as Treasury bond yields rise
The US Dollar managed tepid gains against its major counterparts in early European trade having mostly meandered in narrow ranges through the Asia session. Meaningful trend development remains elusive however, with momentum proving only just sufficient to retrace yesterday’s losses.
The Australian and New Zealand Dollars suffered outsized losses. Their US cousin rose alongside Treasury bond yields, presumably pointing to a hawkish intraday shift in Fed rate hike bets. Not surprisingly, that has proven especially painful for the highest-carry alternatives to the greenback in the G10 FX space.
The noncommittal mood seems to make sense as all eyes turn to Donald Trump’s inauguration as the 45th President of the United States. Fiscal policy uncertainty has been a major hurdle for financial markets as they try to settle on a baseline path for the year ahead.
With that in mind, traders are understandably leery of taking firm directional bets before Mr Trump speaks. To be sure, he is unlikely to offer up all the details that the markets want to hear. However, the vagueness of his pronouncements has been market-moving in its own right before and may be so again.
In the meantime, an expectation of follow-through on intraday price swings is probably an unrealistic one. In fact, it may turn out that market participants opt to take the weekend to mull over whatever Mr Trump has to say, leaving prices rudderless in the interim. Still, the threat of kneejerk volatility is a very real one.
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Asia Session
European Session
** All times listed in GMT. See the full DailyFX economic calendar here.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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