Temperamental USD Drivers

QUIETER WEEK - I'm on the road this week and I suppose if there's a week to be out on the road as far as the markets go, this is a good one. The economic calendar is fairly light, with most of the risk in Asia trade. There is no first-tier data out of the US this week, and things are pretty quiet in the Eurozone and UK as well. As far as Asia goes, the RBA decision is due right about now and the RBNZ decision is due later in the week. But even with these decisions, no changes are expected to policy. I was looking for the US Dollar to continue to take a hit on Monday, particularly after the (arguably) USD bearish US employment report that had hourly earnings on the softer side. Instead, the Dollar rallied back on Monday, albeit marginally. 

DOLLAR'S CORNER - But again, while I do see risk over the short-term for more USD weakness, I do believe the Dollar will make another big run this year. I'm just not convinced we are going to see the Dollar run yet. The two major drivers in the Dollar's corner right now are actually both drivers that could easily be absent at any given time. The first is hawkish Fed policy. So although the market was keen to sell the US Dollar on Friday following a softer hourly earnings print, we need to remember that the market sold the US Dollar because it thinks this is something that will force the Fed to scale back. But what if the Fed doesn't want to scale back. Both Fed Evans and Williams have been out talking hawkish since, with both still open to the possibility for 3 hikes this year. So this could have factored into some of Monday's USD bid tone. 

Post US jobs hawkish Fed rhetoric trying to get #USD back on track. Via @joelkruger

WAITING GAME - The other driver is Trump. Up until this point, it's been about protectionism and soft Dollar talk. But that could change the second we start hearing more about tax cuts and fiscal stimulus. These would be US Dollar supportive policies as they would drive up inflation and force the Fed into a more aggressive tightening bias. So again, right now, there are two possible drivers that could really help the US Dollar, though both have the ability of being absent as well. We will just have to wait and see how things play out and wait for the next trading opportunity. In the interim, maybe we get a market that does something wild this week on some catalyst that we have yet to find out about. I am off the desk and traveling but will still be monitoring the market for opportunities. 

Friday Position Review

Looking at the current exposure as we head into the weekend.


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