Dollar Gets Trump Dumped

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Market Drivers January 12, 2017
Dollar weakness persists as 114.00 given
EZ IP better
Nikkei -1.19% Dax -0.55%
Oil $52/bbl
Gold $1204/oz.

Europe and Asia:
EUR EZ IP 1.5% vs.0.5%

North America:
USD Weekly jobless 8:30
CAD New Housing Index 8:30
Evans, Lockhart, Bullard, Harker all on deck

The dollar dump continued in Asian and early European trade with USD/JPY sinking below the 114.00 figure before finally finding some bidders and rebounding a bit in late morning London trade.

The weakness was driven by selloff in US rates as the benchmark 10 slipped below the 2,35% barrier to trade 2.32% this morning in the wake of reaction to Donald Trump first press conference as President-elect.

Mr. Trump’s presser was a chaotic affair with PEOTUS fending off allegations of Russian secret services blackmail, conflict of interest concerns on his business dealings and lack of any details on any viable replacement for Affordable Care Act. Most importantly, as we warned yesterday, Mr. Trump spent most of the presser dealing with political issues while providing virtually no details about his economic platform and markets were duly disappointed.

The Trump trade was dumped all across capital assets with stocks, bonds and the dollar all selling off in the wake of the presser. Given the tremendous amount of euphoria that built up over the past eight weeks on the Trump rally, the correction was natural and overdue.

With Mr. Trump set to take the reins of power in the next 10 days, the focus on his policy intentions will only intensify, but in the meantime markets will go back to looking at data for further directional clues. To that end tomorrow’s US Retail Sales numbers which is the only US economic report of any consequence this week, will loom large in market’s eyes. The recovery of the US consumer has been choppy at best and traders will want to see strong gains in December given the rise in confidence and wages.

An upside surprise tomorrow could stop the dollar selloff at around these levels, allowing the uptrend to resume. In the meantime however, yields will be the key driving force for the rest of the day and if they begin to slip, USD/JPY could trip below 114.00 once again.

Boris Schlossberg
Managing Director

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