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Dollar Gains Slow, Most Risk Assets Drop, UofM Top Event Risk

Dollar Gains Slow, Most Risk Assets Drop, UofM Top Event Risk

2016-11-11 03:47:00
John Kicklighter, Chief Currency Strategist
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Talking Points:

  • The Dollar's post-election rally has slowed with rate forecasts, risk and policies drive tapped
  • Sentiment bearings across risk assets is growing more than just uneven
  • Top event risk ahead is the University of Michigan sentiment survey, but can it move USD?

See what live coverage is scheduled to cover key event risk for the FX and capital markets on the DailyFX Webinar Calendar.

The recovery from the US election plunge hasn't effectively evolved into a uniform rebound in global investor sentiment. In fact, much of world's markets seem increasingly unnerved about what the future holds. This past session, US equities were championed by the Dow index, but that mix seemed to be the exception to the rule with others stuttering. Meanwhile, most of the other popular risk assets have extended dives linked to the clear rise in global protectionism.

For the Dollar, the fundamental mixed bag leaves a temporary lift via fiscal stimulus hopes (local growth potential) and a retrenched forecast for a Fed rate hike in December. The chances of a 25 basis point hike to the benchmark range nudged back up to its highest level since the beginning of the year - 84 percent. Speculation of inflation from trade and the retreat in volatility open the path for a pullback from extraordinary easing, but it will be difficult to keep this path. In particular, keeping markets quiet so as not to spook the Fed again will be a tall task. Meanwhile, furthering confidence of a hike beyond its already high perch will be difficult to accomplish. Pairs like EUR/USD, USD/CHF and AUD/USD should be monitored for their combination of technicals, fundamentals and the underlying market conditions.

Looking ahead to the final session this week, the balance of sentiment will be a critical theme. For measuring confidence at the source - the US consumer - we have the University of Michigan sentiment survey on tap. This will give a sense of the view moving forward in a split nation. Yet, for trading purposes; the sentiment across global equities, Treasuries, high yield and key emerging markets like China and Mexico will represent the real picture. We look at the crossroad in sentiment and catalysts in today's Trading Video.

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