After a bit of a sell off through a shortened holiday week last week, the United States Dollar has switched course and is trading firmly stronger this morning
Overview
Incoming President Donald Trump over the weekend once again ratcheted up his rhetoric on tariffs over the weekend, and threated BRICS nations with 100% tariffs should they consider developing their own currency and moving away from the Dollar as the world’s reserve currency. In a post on Truth Social and X, Trump espoused that “we require a commitment from these Countries that they will neither create a new BRICS Currency, nor back any other Currency to replace the mighty U.S. Dollar or, they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful U.S. Economy,” which has immediately prompted a Dollar-positive move through the Asian and European sessions. Such an idea had been proposed previously by BRICS nations, but was yet to gain any real traction. Traders, for their part, are taking this language less as a direct threat of such tariffs but rather as further backing from the incoming administration for a strong Dollar, which is a marked turnaround from Trump’s first term in office.
The month-end period through last week saw some unwinding of Dollar longs taken immediately after the election as deliverable flow became more important, but traders are once again piling into USD this morning following Trump’s statements over the weekend. Historically, December has proven to be a rough month for USD – last December, the Bloomberg Dollar Spot Index fell nearly three percent over the course of the month. Given the consistent outperformance of the US economy compared to its peers, however, coupled with Trump’s increasingly antagonistic rhetoric on trade, it’s possible that the typical trendlines may not materialize this December. Following Trump’s first election in 2016, the Dollar initially gained ground, then traders dialed back their positions, but USD’s positive run continued after the swing into the inauguration, and we may be seeing similar positioning emerge this time around.
The data calendar as well picks up steam in the back half of this week after a slow holiday week. The final reading of November’s S&P Global PMI is due on Wednesday morning, after flash readings through the month were slightly above expectations. Friday also sees US employment data for November, after October’s release was heavily impacted by severe weather and strikes.
What to Watch This Week…
- S&P Global US PMI NOV, Wednesday 8:30AM
- Eurozone PMI, Wednesday
- US Non-Farm Payrolls, Friday 8:30AM
- Eurozone GDP, Friday
- Monex USA Online is always open
EUR ⇓
After attempting to stage a comeback against the Buck through last week’s choppy and thin month-end trading, the single currency is once again heavily on the back foot this morning, down nearly three quarters of a percent against USD. French budgetary woes are the primary force behind such weakness today. The far-right party National Rally’s leader Marine Le Pen threatened a vote of no confidence should Prime Minister Michel Barnier not include their proposed policy to index pensions to inflation by the end of the day today, the strongest language used by the party yet. Barnier’s government, for its part, has said the administration “wouldn’t be blackmailed.”
JPY ⇓
Japanese Yen, though still losing a touch of ground against a resurgent USD, is outperforming all of its G10 peers and is only down a little more than a tenth of a percent against the Dollar this morning. Bank of Japan Governor Kazuo Ueda surprised markets with a new bit of hawkish rhetoric over the weekend ahead of the central bank’s December 19th policy decision, giving credence to bets by traders that the BoJ will raise interest rates at this meeting. Japanese inflation last week came in higher than expected, which is giving Ueda the room the central bank would need to raise policy rates and lessen the real yield differential between Japan and the US. Nonetheless, even JPY cannot keep pace with today’s relentless Dollar strength.