Dollar, Futures Slump; Gold Spikes Over $1,200 After Trump Disappoints Markets
By Tyler Durden
Risk assets declined across the globe, with European, Asian shares and S&P 500 futures all falling, while the dollar slumped against most currencies after a news conference by President-elect Donald Trump disappointed investors with limited details of his economic-stimulus plans, and the Trumpflation/reflation trade was said to be unwinding.
“The risk was always that a president like Trump would end up upsetting that consensus (of faster U.S. growth, stronger dollar) view by introducing more political uncertainty,” said asset manager GAM’s head of multi-asset portfolios Larry Hatheway.
The biggest mover, and perhaps the key driver of risk since the election, was the dollar which tumbled as much as 0.8%, falling below its 50DMA for the first time since the election, and back to where it was during the December 14 Fed rate hike announcement, while Treasuries gained alongside commodities, as Donald Trump’s press conference sent a wake-up call to the market about exalted expectations for fiscal stimulus in the U.S.
“Overall, investors are wary ahead of Trump’s inauguration – a case of buy the talk (Trumpflation), but sell the news,” analysts at Societe Generale said in a note.
However while negative for the US, that Trump did not mention possible tariffs against Chinese exports, was a relief for Asian share markets that have feared the outbreak of a global trade war.
The lack of detail about a potential stimulus also put safety plays such as bonds and gold back in favor, cooling bets that have built in recent months on significantly higher global inflation and series of U.S. interest rate hikes. It was enough to send the dollar tumbling back below 114 yen for the first time in five weeks and brought some welcome relief to Brexit-bruised sterling and Turkey’s lira, which has been badly beaten up this year. The USD/JPY broke below the prior session low of 114.25 to reach its weakest level in a month as broad assets position adjustments after recent rally continues to lower the pair’s range, said Satoshi Okagawa, senior global market analyst at Sumitomo Mitsui Banking Corp. in Singapore. Eventually the pair slid as low as 113.77 shortly after the European open before rebounding to just above 114.
The euro was back at $1.0650 for the first time in a month, shaky sterling climbed above $1.22 and Sweden’s crown hit a four-month high and cracked its 200-day moving average against the euro after pacy inflation data. It was also bliss for bond markets that have been in reverse since Trump’s election fuel led bets on higher U.S. interest rates that tend to set the bar for global borrowing costs.
Gold spiked on the weak dollar, rising above $1,200 since November 23, and at the 38.2% Fibonacci of the Trump-Led slide.
With all eyes on the dollar, the U.S. currency slumped against most major and the 10-year Treasury yield touched the lowest since November as Trump’s first press conference since his election victory gave no details on policy.
European stocks headed for their lowest close since the end of 2016 …read more
Source: Dollar, Futures Slump; Gold Spikes Over $1,200 After Trump Disappoints Markets
