The market remains focused on all things Trump, his tweets, policy announcements, executive orders and anything else to with the newly-elected President. Trump's inauguration speech – lacking in details on tax reform and fiscal policy and high on protectionism and “America First” – is seeing the market gradually unwind positions taken up following the election.
The initial market reaction seen during and after his inauguration speech – lower equities, lower bond yields and a weaker USD have all continued into the first full trading day since that event. There has been no top tier data released or anything much else going on for the market to focus on. The market wants to see some detail on the more positive aspects of Trump's policies but the current newsflow is more about the negative aspects of the policy agenda. Until that changes, the risk lies with the market theme of the past 24 hours continuing over coming days.
The USD major currency TWI is down around 0.5%, taking its cumulative losses since Trump's speech to 0.8%. The USD's losses have been broadly based. The yen has been the biggest beneficiary, supported by the path of lower US Treasury yields. USD/JPY trades around 113, having traded down as low as 112.76 this morning.
The NZD sits around 0.7215, close to the top edge of its trading range for the past week and close its highest level in over a month. We think that the path of least resistance over coming weeks is still to the upside, given net speculative short positioning, the USD losing its shine as the detail begins to matter for policy, and our fair value estimate sitting around the 0.7350 mark. Thursday's CPI data will be crucial.
NZD/AUD is close to the top of the 1-cent trading range it has been stuck in over the past two weeks and it sits this morning at 0.9540, with AUD/USD around 0.7560.
GBP continues to trade well in the aftermath of PM May's Brexit-focused speech last week, making gains not only against the USD but also against EUR. GBP/USD almost broke through the 1.25 mark this morning, and it currently sits at 1.2480, with NZD/GBP down a touch at 0.5780. Overnight, PM May is reported as saying that the UK government will pick winning areas in the economy to champion as part of an industrial strategy post Brexit, something reminiscent of NZ in the 1970s and 80s.
Get our daily currency email by signing up here:
Daily exchange rates
Select chart tabs
BNZ Markets research is available here.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.