Dollar Exposed to Trump Striking Hawkish Tone at State of Union By Bloomberg

0
12

© Reuters. Dollar Exposed to Trump Striking Hawkish Tone at State of Union

(Bloomberg) — The could be vulnerable if President Donald Trump comes out swinging on trade and risks another government shutdown in his State of the Union address.
Sentiment on the U.S. currency has been driven in recent months by the trade conflict with China and Trump’s efforts to obtain funding for a wall on the border with Mexico, which prompted the longest U.S. government shutdown in history. If the president chooses to escalate these issues in his speech later Tuesday, the dollar could be set to extend this year’s drop, according to Mizuho Securities Co. and Westpac Banking Corp.
“There’s likely to be a nervous reaction — weighing on Treasury yields and stocks — if Trump just complains about Democrats and threatens another shutdown next week if they don’t agree to wall funding,” said Sean Callow, senior currency strategist at Westpac.
The Bloomberg Dollar Spot Index, a gauge of the greenback against its major peers, has fallen around 1 percent this year, as U.S. growth slows and the Federal Reserve has curbed expectations for further interest-rate hikes. Ten-year Treasury yields fell six basis points in January, the third monthly drop and the longest run of declines since 2017.
Both Morgan Stanley (NYSE:) and Nomura International Plc see dollar weakness becoming a negative spiral if foreign investors lose faith in returns from dollar assets.
For Mizuho, the market will be wary of Trump’s “obsession” with building a wall but the impact may be benign if he stops short of threatening another government shutdown, according to its chief foreign-exchange strategist Kengo Suzuki. The same applies for his comments on China.
“If Trump shows a hawkish stance but strikes optimism by emphasizing progress being made in trade talks, market impact will be limited,” he said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here