Dollar stays on hold before Trump bill vote and Yellen speech

23.03.2017 / 13:18

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Most Group-of-10 currencies traded sideways and in tight ranges as investors stayed on the sidelines before a U.S. Congress vote on health-care reform that could either reignite reflation-trade dynamics or further pressure the dollar and U.S. yields.

Long-dollar positions were further cut this week as a less- hawkish-than-expected Federal Reserve was followed by concerns that President Donald Trump’s fiscal policies could take longer to materialize should Congress reject the health bill. Squaring of longs, coupled with momentum investors who sold on technical breaks, sent the greenback to its lowest level since the U.S.
elections, according to Europe-based traders.

Another 1.9 percent drop in the Bloomberg Dollar Spot Index would fully erase Trump-fueled gains. Leveraged and interbank accounts are looking to trade on the Congress event in size, the traders added, who asked not to be identified as they aren’t authorized to speak publicly. Macro names are also on lookout for Chair Janet Yellen’s speech in Washington Thursday, the first since the Fed hiked rates, with some hedge funds positioned for a dovish tone.

With first round of French presidential elections now just one month away, implied volatilities and skews responded to the associated risks

Flows in options haven’t been off the charts, yet EUR felt the heat in the spot market as traders looked to neutralize delta exposure; EUR/USD drops a second day, halves Monday gains to eye bids near 1.0750

USD/JPY is lower an eighth day, its longest losing streak since February 2011; rallies to 111.60 are seen as an opportunity to engage on fresh shorts, with stops placed nearby:
traders

The pound rose to a fresh high for March after U.K. retail sales beat estimates, yet the move faded quickly as the latest surge in consumer prices means such a trend may not be sustainable; GBP/USD stabilized around 1.2500 handle.

Bloomberg

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Dollar stays on hold before Trump bill vote and Yellen speech

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