Dollar recoups losses amid caution ahead of inauguration
Concerns over details of speech offset better-than-expected data from China
The dollar recouped earlier losses yesterday while stocks were little changed as investors refrained from big bets ahead of Donald Trump’s inauguration as US president and a speech that could shed some light on his economic policies.
Mounting questions about how Trump’s administration would carry out an ambitious agenda of lower taxes, more government spending and looser regulations have seen a pause in the post-election rally in risky assets.
Concerns over the details of Trump’s inauguration speech offset better-than-expected economic data from China and comments from Federal Reserve Chair Janet Yellen in which she sounded less hawkish. Tens of thousands of law enforcement officers and miles of barriers were in place in Washington DC, as officials braced for hundreds of thousands of people planning to celebrate or protest the inauguration of Trump.
The dollar, which has lost some of its momentum in recent weeks, was up 0.1 per cent against six major currencies.
Stock futures on Wall Street, trading close to all-time highs, were up 0.2 per cent recovering some losses from the previous session. “All eyes will be on the content and style of Trump’s inauguration speech,” Morgan Stanley strategists led by Hans Redeker wrote in a note.
Outcome
“The more ‘Presidential’ this speech comes across, the better the outcome for markets,” the strategists wrote.
European stocks were down 0.1 per cent with mining shares, the biggest beneficiaries of the reflation rally spurred by Trump’s election win, the biggest drag on the indexes.
Europe’s benchmark index was poised for its worst week since before Trump’s election win last November. Eurozone government bond yields hit one-month highs yesterday on hopes of stronger growth and higher inflation. “Trump has been talking very strongly about his desire to invest heavily and deliver fiscal expansion,” said Matt Cairns, fixed income strategist at Rabobank.