Greenback tugged both ways - Natixis

Research Team at Natixis notes that since the start of the year, the US dollar has corrected significantly against most G10 currencies.

Key Quotes

“The greenback’s depreciation has come about mainly because of uncertainties over Donald Trump’s economic programme. The president-elect has maintained radio silence when it comes to his economic stimulus package: no reference to it in his speech of 11 January or in his tweets, enough to unnerve the equity markets that rose sharply in Q4 2016 in anticipation of a substantial fiscal stimulus package. Instead, Donald Trump brought the spotlight to bear on measures that the markets had chosen to ignore, namely protectionist measures. He continued to fustigate American companies planning to relocate operations (notably in Mexico) and foreign companies wanting to do business in the US. Donald Trump also clearly inferred he considered the US dollar was too strong.”

“Despite these negative announcements, the US dollar has stabilised in recent days because of a series of hawkish statements by FOMC members and some solid macroeconomic indicators, showing the economic growth remains robust. In particular, Janet Yellen reiterated that the US economy was sufficiently solid to cope with a gradual rise in the Fed Funds rate and that the Federal Reserve needed to restore some leeway. The Fed Chair wanted to convince the market that the Federal Reserve was not behind the curve, i.e. has not fallen behind schedule in its monetary tightening cycle despite the upturn in inflation, back above 2%.”