Trump breaks off fiscal stimulus talks
A tweet from US President Trump caused a downturn in the equities markets and sent the US dollar higher. Trump announced that he is breaking of stimulus talks with congressional Democrats and that instead, he would enact a new package after he wins the elections.
The Trump stimulus announcement saw risk-sentiment abruptly reverse to the downside, which in turn saw the haven US dollar and Japanese yen finish the session with substantial gains versus the G-10 universe. US treasury yields also managed to hold onto most of their recent increases, although the main story driving flows was the unwinding of bullish stimulus sentiment.
The US dollar index rose 0.45% to 93.85, leaving the DXY in the middle of the three-week range. The euro fell 0.40% to 1.1735, with sterling falling 0.80% to 1.2880, with the addition of Brexit uncertainty. The pro-cyclical major currencies came in for special attention. AUD/USD fell by 1.10% to 0.7100 and has now traced out a double top at 0.7210 and is in danger of testing its 100-day moving average (DMA) at 0.7060. NZD/USD fell 0.85% to 0.6580 and has traced out four daily highs at the number of the beast, 0.6660. NZD/USD is in danger of tracing out a bearish inverse head and shoulders formation with a failure of 0.6500 opening deeper losses to 0.6200.
With China still on holiday, activity in regional Asian currencies is more muted. USD/CNH has edged higher to 6.7900 reflecting the move into US dollars overnight. The Singapore dollar, Thai baht, Malaysian ringgit and Philippine peso all fell modestly overnight, although the fallout was much less than the G-10 grouping. Regional Asia will likely continue to outperform vis-a-vis the major currencies, boosted by their high correlation to robust China data.
In the bigger picture, more US dollar strength is likely as markets reverse course to fully price in a no-stimulus deal in the US and increasing US election uncertainty.
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Jeffrey Halley
He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays.
A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others.
He was born in New Zealand and holds an MBA from the Cass Business School.
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