Incisive market commentary from David Morrison

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Tory Poll Lead Narrows Sharply - Video Update
31 May 2017
S&P 500 and NASDAQ break winning streak
31 May 2017
Sterling swings on polls - PM Bulletin
30 May 2017
Equities drift after long holiday weekend - AM Briefing
30 May 2017
Crude oil slumps on OPEC disappointment - AM Briefing
26 May 2017
OPEC disappoints while FOMC minutes provide cheer - Video Update
25 May 2017
OPEC expected to agree 9-month extension - AM Briefing
25 May 2017
Look-ahead to OPEC - Video Update
24 May 2017
Markets quiet ahead of FOMC minutes and OPEC - AM Briefing
24 May 2017
Crude oil update - OPEC meeting in focus - PM Bulletin
23 May 2017
Markets shrug off atrocity in Manchester - AM Briefing
23 May 2017
Equities mixed, but supported by oil
22 May 2017
Nerves steady after firmer close on Wall Street - AM Briefing
19 May 2017
Political fall-out continues to weigh on markets - Video Update
18 May 2017
Slide in European indices accelerates - AM Bulletin
18 May 2017
Trump’s woes hit markets - Video Update
17 May 2017
Trump’s woes lead to market wobble - AM Briefing
17 May 2017
EURUSD hits six-month high - PM Bulletin
16 May 2017
Crude oil extends rally - AM Briefing
16 May 2017
US inflation data and retail sales in focus - AM Briefing
12 May 2017
Crude oil recovers after “flash crash”- Video Update
11 May 2017
Crude oil soars while equities drift - AM Briefing
11 May 2017
Are investors too complacent? - Video Update
10 May 2017
Investors rattled after Trump fires FBI head - AM bulletin
10 May 2017
Crude oil’s “flash crash” leads to OPEC desperation - PM Bulletin
09 May 2017
Equities rally as oil steadies - AM Briefing
09 May 2017
Forex: Top Ten Tips for beginners - Trading Guides
08 May 2017
Markets little moved after Macron win - AM Briefing
08 May 2017
Payrolls in focus - AM Briefing
05 May 2017
NFP look-ahead - Video Update
04 May 2017
FOMC hints at rate hike in June - AM Briefing
04 May 2017
FOMC look-ahead - Video Update
03 May 2017
Apple disappoints on sales numbers - AM Briefing
03 May 2017
CFD Trading Tips - Trading Guides
02 May 2017
European traders return after May Day - AM Briefing
02 May 2017
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The dollar continues to come under selling pressure with the euro being the main beneficiary. Earlier today the EURUSD hit its highest level since 9th November - just after Donald Trump clinched victory in the US presidential election. The latest round of dollar selling follows allegations that President Trump disclosed classified information to Russian officials during a White House meeting last week. Trump has insisted that he had every right to share facts “pertaining to terrorism and airline flight safety.” But the controversy comes hot on the heels of Trump’s sacking of FBI Director James Comey which some commentators say is part of a cover-up into the president’s Russian dealings. Overall, Trump is coming under pressure, rightly or wrongly, and this is preventing him from getting on with the business of pushing through his campaign promises for fiscal stimulus. Even worse, there are suggestions that a number of parties are determined to get him out of the White House which would mean impeachment. This is all starting to look like a concerted campaign to discredit Trump, although it’s fair to say that he hasn’t done himself any favours with his tweets and outbursts.  

But it’s not all about the dollar as the euro is also back in favour. Politically, there’s been a wave of relief that far-right parties were defeated in Dutch and French elections. Also, regional elections last weekend showed that German Chancellor Merkel still has plenty of support, despite recent difficulties. For now, much of the risk associated with holding the euro has subsided. On top of this, recent growth numbers from the Euro zone have been highly encouraging and inflation is picking up. This is putting pressure on Mario Draghi and the ECB Governing Council to start tightening monetary policy. Many traders expect the EURUSD to make further gains helped by a wave of short-covering and stop-losses above 1.1000.

This could be the case, but it’s worth considering that Mario Draghi has only just stated that it’s too soon to start winding down the central bank’s bond purchase programme. Against this, the US Fed has already taken its first steps in normalising monetary policy. And with the yield on the US 10-year Treasury still above 2.30% while the corresponding German Bund yield is 0.42%, the dollar does have a compelling attraction. Of course, it could be argued that the Fed is tightening into weakness as recent US economic data has been less than stellar. It is probably this fear which has seen the greenback decline sharply ever since it hit a 14-year high against the euro and the basket of currencies in the Dollar Index at the beginning of this year.

It’s also worth noting that there’s still a gap in the EURUSD chart going back to the first round in the French presidential election. So while the momentum suggests the EURUSD could have further to go on the upside, it may not be plain-sailing. There’s certainly a chance that the gap gets filled, but when that may happen is anyone’s guess.


Posted by David Morrison

Category: PM Bulletin

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