The USD suffered a major setback yesterday as the much anticipated speech by the president elect Donald Trump left much to be desired in terms of direction regarding fiscal stimulus and the economy at large. Trump made no mention of these factors, but instead focused his attention to setting the media straight regarding allegations that he was in cahoots with Russia to manipulate the electoral results, adding more uncertainty to financial markets as the US appears to be falling apart. One sector the president elect did touch on, was that of pharmaceuticals, where he slammed them for exuberant pricing which were passed on to American tax payers and putting a strain on the countries health system which resulted in a selloff in these sectors but overall had a neutral effect on equities at large which managed a slight uptick.
With the USD index, which measure the strength of the USD against a basket of currencies, falling back toward the 101 level, USD bulls are rightly on edge as they see their profits erode away. Granted there is still a way to go, given the huge gains they made since the elections but with sentiment changing quickly, a major deleveraging by bulls is not out of the questions which would see the USD bears thump prices lower as they begin to average their shorts in anticipation of further declines.
Today’s key data, which may prove instrumental in deciding the future outlook of the USD comes in the form of the US Unemployment Claims and Import Prices m/m, expected at 266k and 0.8%respectively, and the speeches by FOMC`s Evans and Harker. Should the data come out positive with prints higher than expected, we would see USD bulls rejoice as they look to regain the edge while worse than expected releases will see bears potentially tipple over the current equilibrium to a march south. The speeches from the FOMC members are also of important given the heavily positive speeches by a host of member on Friday, which saw the green back make another run up. Should these members maintain their positive tone, we will see the USD gain while negative tones will sour sentiment further, driving the USD lower.