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Markets await Trump's press conference
Markets await Trump’s press conference

Trump and The Dollar Bulls

10 days agoByBob Mason

The markets remained gripped with Trump fever through the early part of the day, focus firmly on Trump’s first news conference since winning the presidential election on 8th November.

A lack of material macroeconomic data out of the U.S in the first half of the week has left the Dollar exposed before a bounce back in the Dollar through the European and U.S sessions on Tuesday, with the Dollar Spot Index recovering to 102 levels at the time of the report, the Index having struggled to hold onto the 102 handle as the markets continue to respond to last week’s stats and FOMC meeting minutes, with FOMC members providing little evidence of a shift in sentiment towards the projected rate path.

The U.S economy is certainly on the front foot, which suggests that Dollar strength is expected to ultimately prevail, while anxiety ahead of today’s news conference has pegged back the Dollar, the president-elect’s persistent Tweeting leaving an air of unpredictability to what the markets are to expect.

Asian markets managed to shake off some of the anxiety through the Asian session that had left the Dollar in the red through the Asian session on Tuesday, with the Dollar making up ground against the Yen, gaining 0.26% at the time of the report, though any major moves have been on hold ahead of the news conference, the level of impact by a president-elect on global financial markets quite unprecedented, leaving one to question at what stage will ordinary course of business resume, focus needing to return to the outlook towards FED monetary policy and the direction of the U.S economy and economies beyond.

With a lack of material economic data out of the U.S through the day, there really is nothing else for the markets to consider, raising the stakes later today, with the Dollar and equity markets likely to see some sizeable moves through the news conference.

We will be looking for Trump to outline his policy goals upon taking office, which would clear up the uncertainty over foreign policy and intentions domestically, a view echoed by the FED in the December FOMC meeting minutes, concerns over punitive trade tariffs weighing heavily on Asian markets in particular.

A detailed outline of a fiscal stimulus package largely in line with market expectations will certainly be a positive for the Dollar and European and U.S equity markets, though whether this is where the markets are suffering the greatest degree of anxiety remains to be seen, foreign policy likely to have more of an impact on the global markets, the fiscal stimulus package largely priced in, notwithstanding the usual rally should more concrete details be provided.

The question now is really whether Trump will be able to draw a similar response from the markets as seen on November 8th?

Recent tweets and commentary suggests otherwise, but it would be a dangerous game to bet against the underdog who took office, surprising, not just the markets, but governments around the world.

The Dollar Spot Index is sitting at 102.11, a gain of just 0.10% on the day, though 103 levels are more than likely should Trump deliver a positive message for the U.S and global economy later today, other beneficiaries likely to be commodity currencies, the AUD outperforming through the early part of the day, up 0.2% to sit just shy of $0.74 levels at the time of the report.