USD: Protectionist trade stance has more focus in press conference – MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the US dollar has weakened following yesterday’s press conference from President elect Trump extending its modest correction lower so far this year.

Key Quotes

“President elect Trump provided no fresh catalyst to re-energise reflation trades which is encouraging a further unwind of elevated long US dollar positions in the near-term. President elect Trump’s overall tone came over as more confrontational and the topics discussed placed greater weight on protectionist trade policies which is also weighing on the US dollar.”

“China and Mexico were cited as having taken economic advantage of the US. Beyond short-term position adjustment, we are not convinced that the comments will have a lasting impact on the foreign exchange markets. Economic fundamentals remain supportive for the US dollar with recent weakness more likely to prove shortlived. The market’s focus will now shift to an upcoming speech from Fed Chair Yellen on the 18th January and President elect Trump’s inauguration on the 20th January.”