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Simon Smith

Searching for a new narrative

Popcorn at the read today as President elect Trump has a scheduled news conference later in the day (around 16:00 GMT). Markets have become used to listening to him in 140 characters or less over the recent weeks, so a more elongated narrative should be welcome. It’s pretty clear that the dollar strength has stalled, with the uptrend seen since the US election results waning on a technical basis. The week so far has seen some reversal of the recent weakness, but this has been within very narrow ...

Simon Smith

The sterling conundrum

Yesterday’s early weakness in sterling, on the back of the latest comments from PM May surrounding Brexit, took cable close to key support levels and the resilience seen through most of the post US election period has been unwound. You can see that better illustrated on EURGBP, where we have seen all of the move down to near the 0.83 level unwound as the cross has pushed above 0.87 to pre-election levels. The conundrum is between the uncertainties created by Brexit, against the fact that ...

Simon Smith

Selling into USD strength

In summary, Friday’s US jobs report was pretty much in line with expectations, although the slightly better data on earnings gave some support to the dollar into the end of the week. As a result, the US currency was little changed from Tuesday’s opening levels. This was at least true against the single currency and yen, less so against sterling which stands more than 1% weaker over the period, together with most of the commodity based currencies, the Aussie, Canadian and Brazilian real all ...

Simon Smith

It’s all about positioning

If the past two day has taught us anything about the FX market, it’s that the dollar is more about positioning than trading off fundamentals. We saw that yesterday, with the dollar weakening during the latter stages of the European session, despite better than expected non-manufacturing ISM data in the states. Of course, this was also evident in what we saw in China, with a huge shortage of yuan liquidity pushing up off-shore overnight rates to around 90% in Hong Kong and contributing to the ...

Simon Smith

The dollar correction cometh

The issue with the dollar rally has always been its foundations. I highlighted this yesterday and this was also a feature in the Fed minutes released last night. The discussion over the economy reflected that participants “emphasized their considerable uncertainty about the timing, size, and composition of any future fiscal and other economic policy initiatives as well as about how those polices might affect aggregate demand and supply”. But that has to be balanced by the fact that almost all ...

Simon Smith

The dollar correction

We’re at something of an inflexion point with the dollar. Although we’ve seen a very strong rally in the wake of the US presidential election vote, there has only been a marginal correction into the end of last month. The moves seen in the past few sessions have largely eroded that correction, both on the dollar index and USDJPY standing less than 0.5% below the highs for the year. The release of minutes to the December FOMC meeting this evening are not likely to add much to the mix, given the ...

Simon Smith

Returning to normal

The past (shortened) week has seen some choppy activity in markets and especially in FX, as the thinner liquidity conditions combined with lack of news flow. That dynamic should dissipate as this week goes on, as liquidity and people return to work after the Christmas and New Year break. After a sluggish Asia session, the start of European trading has seen the dollar catch a mild bid, especially against the yen where the 118.00 level is being tested, putting the mid-December high of 118.66 back ...

Simon Smith

Losing steam

Equities appear to be struggling into the end of the year as yesterday’s obsession, whether the Dow could hit 20,000 not coming to fruition. That will no doubt continue today, but the upward momentum is likely to struggle as liquidity ebbs away from markets during the last few trading days of the year. Equities in Asia were mixed, firmer in China but softer in Japan. As for currencies, the dollar peaked in the middle of the European session before softening into the close and overnight. Given ...

Simon Smith

More cautious for now

Overnight events have given the dollar a modest bid, with three events having occurred around the world seen as terrorist related. This follows on from the softer tone seen at the start of the week and represents a new dynamic for the market to contend with as volumes taper off into the end of the year. We also had some bullish comments from Yellen last night around the jobs market which also supported the dollar at the margins. For USDJPY, this has allowed a reversal back towards the 118.00 ...