USD Strength Returns

Just yesterday, we had been lamenting the lack of strength in the USD but had warned that it is going to be only a matter of time before the dollar strength returns as the Trump administration begins to settle in. This is what we have been seeing over the past 24 hours as the dollar strength returned across the board and this time, there are signs that the strength has come back to stay and this is not the sm,all bounces that we have been seeing over the past few weeks. We saw the EURUSD pair fall by over 120 pips while the USDJPY bounced off from its range lows and bounced as high as 170 pips and now trades just above 115 as of this writing and it looks good for more.

The reason why we felt that it was only a matter of time before the dollar strength returned was the fact that the market wanted to feel comfortable again with the US administration. A new team is in place after 8 years and Trump had won based on campaign promises that went completely against the establishment. So, it was only natural that the markets were a bit jittery though it was happy that a businessman won the election as it believed that a businessman would favor corporates and markets. So, the market adopted a wait and see approach to see whether he follows through on this promises and how far he would go to fulfill some of his promises and as has been seen over the last few days, they have done pretty well and met the expectations which has made the markets very happy and this is evident from the fact that the US markets are moving to all time highs.

Looking ahead to today, we have the advance US GDP data and this will be watched closely as some good data will make it easy for the Fed to hike rates in the coming months.

 
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