The “News Conference”– Where did the Dollar Bulls go?

If the reaction of the FX World is anything to go by, Trump’s first news conference was far from convincing, the Dollar bulls running for the hills leaving the bears to savour the moment, having been torched back in November.

Well, the markets were quietly hoping for the president-elect to cover policy intentions going into office and the markets got quite the opposite, the anxiety in the run up to the news conference justified, the Dollar Spot Index was sliding 0.84% to 100.92 this morning, with more likely to come.

The FED’s crystal ball was clearly working well back in December, the economic outlook sound with uncertainty over Trump also justified, that victory speech back in November obviously written by someone whom is no longer a member of the Trump Team.

So, what went wrong? The lack of direction or guidance on policy intentions upon taking office was certainly the main issue, notwithstanding the president-elect’s inability to hold a news conference, clearly lacking and somewhat concerning, the Trump rally now in question, financial markets perhaps finally able to shift free from the Trump-effect.

The U.S economy is in a good place and this may have eased any immediate need for a fiscal stimulus package, punitive tariffs and the “Wall” being more relevant for Trump than the fiscal stimulus package, which had been more of a given for the markets than foreign policy, though its’ too early to write off a fiscal stimulus package just yet.

Just how much Dollar strength stemmed from Trump’s intentions to deliver a fiscal boost to the U.S economy is reflected in the Dollar this morning, the EUR gaining 0.45% to $1.0631, cable up 0.73%, recovering to $1.23 levels, Cable’s upside coming despite the negative sentiment towards Brexit, with the Dollar sliding a whopping 0.91% against the Yen, the Yen hitting levels not seen since early December, as concerns of a material shift in trade terms, a likely trade war with China and the lack of details on a fiscal stimulus package seeing Treasury yields on the slide, widening the yield differential in favour of the AUD, which is up 0.8% at $0.75008 at the time of the report, the AUD getting an extra boost from the rise in commodity prices, the Bloomberg Commodity Index up 0.75%, though there will need to be some caution, a trade war with China certainly a risk to the Australian economy and the AUD.

With the Dollar Bulls in hiding, it certainly makes for an interesting European session, the ECB monetary policy meeting minutes scheduled for release this afternoon expected to lead to some easing in the EUR, though with the Dollar on the back foot, the moves are unlikely to be as material, the only question being whether the Board tossed around the idea of any tapering to the asset purchasing program back in December, any hawkish commentary likely to drive the EUR to $1.07 levels and beyond.

Stats out of the U.S, which are limited to the weekly jobless claims numbers and December’s import and export price index figures, are unlikely to have a material impact on the Dollar, the markets now having to consider the possibility that the FED can settle back into its patient approach to rate hikes, which is a negative for the Dollar, though we do expect the Dollar to bounce back tomorrow afternoon, retail sales figures out of the U.S expected to draw some Dollar bulls from the hills.