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Talking Points:

  • NZ Dollar leads G10 FX higher as “fade the Fed” dynamics re-emerge
  • Japanese Yen declines as stocks push higher across Asia Pacific bourses
  • US Dollar looking to Congressional vote on tax cut plan for a lifeline

The New Zealand Dollar led the major currencies higher against its US counterpart at the start of the trading week. The greenback managed a bit of an upswing Friday, but the “fade the Fed” narrative that emerged following the FOMC policy announcement looks to be back in play. The Australian Dollar – another yield-seeking alternative to the humbled US unit – also enjoyed broad support.

The Japanese Yen declined fell as stocks roared higher in Asia Pacific trade, applying familiar pressure to the standby anti-risk currency. The MSCI APAC regional benchmark equity index added 0.4 percent. The newswires attributed the move to optimism about US rate cut prospects after Republicans managed to sway two senators previously opposing the plan to fall in line on Friday, securing enough votes pass it.

Looking ahead, a quiet economic data docket in European and US hours seems likely to keep the spotlight on Washington DC, where the vote on tax reform may stake place as soon as Monday. The US Dollar may find a bit of support if the measure passes, although its post-FOMC plunge suggests the plan’s adoption is all-but-fully priced into the markets and may not generate much more of a lasting response.

On the sentiment side, futures tracking the FTSE 100 and S&P 500 are pointing convincingly higher before London and New York come online. This hints that the Yen may remain under pressure while commodity bloc FX continues to be well-supported by carry-inspired demand. Risk trends have been especially fickle intraday of late however, so traders would be wise to temper expectations for robust follow-through.

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Asia Session

US Dollar Looks to Tax Cut Vote for a Lifeline

European Session

US Dollar Looks to Tax Cut Vote for a Lifeline

** 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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