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Dollar Firming On A Wing And A Prayer
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Loading...No need to elaborate in detail today as the dollar is firming “on a wing” that the White House press corps is correct that the Trump Administration is readying an infrastructure plan for January 30, and a “prayer” for a tax bill deal. While the US economy is booming, President Trump’s long-standing pledge may be upon us as infrastructure spending at both a federal and state level could be a real game-changer for the dollar as the resulting massive pickup in business investment could propel the US economy to 4% growth, ceteris paribus. The headline boosted stocks and yields in late NY trading and lit a fire under the dollar bulls. The one exception was sterling which bucked the dollar trend on reports that Prime Minister May and the DUP were close to a deal on the Irish border deadlock.
Looking forward, an extension of the latest dollar churn might all boil down to this evening's wages data with the tail risk for a hawkish inference on the employment headline. The jobs report will play a significant factor in keeping the dollar rally alive and forwarding the view of an early 2018 rate hike.
Japanese Yen
The bounce in US yields was convincing enough to propel USD/JPY through the 113 level and only held back by the YCC debate after Governor Kuroda recapitulated his Hawkish deterrent overnight. Also, the long USD/JPY trade appears stable as some element of diplomacy enters the NK fray.
The Pound
Apart from digesting the infrastructure headlines, stage whispers surrounding Brexit will continue to drive GBP sentiment.
Gold
Predictably, XAU hastened losses on this infrastructure news – as the recent sell-off gathers speed and bids remain far and few between.
Source: Bloomberg Pro Terminal
Jr Trader Alexander Kumanov
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