There was a sense of stabilisation yesterday after the sharp rise in bond yields seen at the end of last week, the impact of which spilled over into the FX and also equity markets. It’s notable that trading ranges have remained wider since the US election last week, more notable in EURUSD and USDJPY, less so on sterling which has outperformed the dollar for the most part over the past week. But the narrative on the dollar is strong, having closed above the 100 level of the past couple of days, that’s more than a 5% increase over the past six weeks. A move higher in interest rates next month is now a near dead-cert, with the implied path for rates next year also moving higher, providing further support for the dollar.
Overall, it’s still proving hard to pull away from Trump presidency speculation, which continues to drive many asset classes and sectors, especially financials, technology and pharmaceuticals in the US. The data calendar today see labour market data in the UK, but this won’t impact the same way that the US jobs numbers impact the dollar. Sterling has continued to hold up well in the post-US election environment. For now, it’s difficult to see the strong dollar environment receding, at least until the narrative on the dollar changes, which looks unlikely for now.