(16 MARCH 2018)DAILY MARKET BRIEF 1:USD takes a hit as Trump fires another of his adviser
Financial markets are encountering turbulence on the last trading day of the week amid allegation that Trump has fired his national security adviser H.R. McMaster. After gaining ground against most of its peers, the US dollar took a nosedive during the Asian session, as investors rushed into safe-haven assets ahead of the weekend.
The Japanese yen outperformed its G10 peers as it rose 0.56% against the buck, while the Swiss franc appreciated 0.25% with USD/CHF sliding to 0.9490. However, the latter is still trading within its weekly range in between 0.94 and 0.9535. On the medium-term, the bias remains on the upside for the pair, with the 0.96-0.97 area as closest resistance area.
US Treasury yields have stabilised since mid-February with the 2-year yield trading around 2.28% and the 10-year one treading water around 2.82%. Investors are now waiting to get further clarity regarding the Fed’s plan for the rest of the year. However, the constant increase in short-term interest rates suggests that Powell’s message has been heard loud and clear. The 3m Libor hit 1.78%, while the 3m OIS swap rate has been increasing continuously for the past seven months and currently stands at 1.68%, suggesting that market participants are increasingly confident that the Fed will follow up with another rate hike in June.
We think that the buck is bias to the upside, as investors will re-focus on the Fed’s policy tightening and put the political mess aside. However, we maintains our bullish view on EUR/USD as the ECB is also moving, slowly though, towards tightening.
By Arnaud Masset
