USD momentum could well fade over medium term – MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that while we may well see further dollar gains over the short-term on reflation hopes fuelled by Trump’s tax policies that momentum could well fade as we perhaps get a sense of how active Trump will be on some of his more divisive policies that landed him the presidency.

Key Quotes

“The low for EUR/USD in October was 1.0851 and then we have the low from March at 1.0822 - an area that should act as good technical support as markets await further indications on the initial direction of policy under President-elect Trump. The dollar looks quite rich at these levels given the degree of uncertainty that lies ahead. It is also worth remembering that a steeper UST bond yield curve will encourage greater hedged inflows from abroad that will help cap yields while the flow itself fails to support the dollar.”