Dollar Correction
The infamous grab, hold, pull repeat handshake of President Trump almost sent several tumbling down during his inauguration at the US Capitol yesterday. Meanwhile, the actions and rhetoric surrounding his inauguration categorically did send the US Dollar lower following weeks of strong appreciation. Volatility had been expected moving into Trump’s inauguration yesterday. Whilst commentary flickered between branding outgoing President Biden’s plethora of pardons down to a tyrannical incoming Republican versus guilt, executive orders were being signed.
Those orders declared national emergencies in the areas of national security and energy. Translated from Trump to English that means enabling more natural resource extraction within the USA and enabling it to be sold domestically. Social security means addressing current and prior immigration trends particularly from the south. Despite a lot of words, nothing tangible was offered in terms of trade. The establishment of an external revenue body hints at future tariffs but nothing of the common external tariff that Trump’s election campaign pledged.
News flow during the day prompted USD selling. The Dollar’s correction lower was encouraged by existing market positioning and valuations. Headlines suggested talk of tariffs and trade would not proceed as vociferously as other items on Trump’s agenda prompting a risk-on rally to the detriment of the US Dollar. Implied and realised volatility remain high with markets wary of Trump’s initial moves. There is the potential for an extension of yesterday’s USD correction during today’s session as US markets reopen following a bank holiday.
Discussion and Analysis by Charles Porter
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