We had a big day across the financial markets yesterday as comments from Treasury Secretary Steven Mnuchin that he welcomes a weaker dollar led to huge dollar selling across the board. Naturally the currencies led the way with Euro up through 1.2400, Cable up to 1.4250, Aud up to nearly 0.8100 and UsdJpy down to 109.00. However, the impact was felt across the markets especially in the Commodities markets which saw huge gains against the greenback. Equities were also caught up in the turmoil and we saw a sea of red across the European indices (FTSE notably down 1.14% on the day)which flowed through to the US market, although they finished up in a better state then their European counterparts.
The comments came on the back of the recent down trend in the dollar and against a back drop where the market is nervous of further US protectionism and its consequences and this led to an acceleration in the dollar’s decline – President Trump is due in Davos today and the market will be looking for any further signs (it’s not normally difficult to spot them) of an increase in protectionist policies and this should lead to more dollar selling.
One currency that has opened the Asian session on the back foot though is the Kiwi, we had CPI data out of NZ this morning and it was much worse than expectation coming in at 0.1% against the expected 0.4% QoQ and this saw the flightless bird drop nearly a big figure against the dollar and similar amounts on the crosses.
Moving into today’s trading, it’s more of the same for most traders as they look for levels to sell the dollar, although maybe with a bit more in the way of aggressive strategies after last night’s moves. Kiwi traders will be looking for levels to get short of the bird with the crosses being favoured more than the dollar given the overnight moves. It’s quiet ahead in the Asian session for fundamental data and the focus will swiftly move to Europe with more comments expected out of the WEF in Davos and more importantly the ECB rate decision later in the day.
With the ECB ahead there may be limited further topside for the Euro until we hear from the central bank around 12.30 am today. The market will be watching this announcement and press conference very closely for any further hawkish intent but also aware of the recent ‘jawboning’ that we’ve had from ECB officials. Later in the day we have the weekly unemployment numbers and New Homes data out of the US but it looks set up for most of the action to occur during the London session.
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