Markets:
- Gold rose $13 to $2,662
- US 10-year yields steady at 4.68%
- WTI crude fell 93 cents to $73.32
- S&P 500 up 0.2%
- USD leads, GBP lags
The US dollar finished as the best again today. In the bigger picture, the market is becoming increasingly concerned about Trump taking office and imposing tariffs. With the whole world on target, the only safe place is the US dollar. The rhetoric will not subside, including after Trump takes office.
The pound was the biggest loser on the day, but all the selling happened hours ago in the US. The catalyst was gilt yields falling to their highest level since 2008. Rates fell below 1.2450 as the pound fell to its lowest level since April. There was a slight recovery in North American trade as the US dollar fell modestly.
Economic data was mixed with the ADP number negative for employment, while jobless claims fell. The Fed’s minutes were largely ignored, but Waller made comments that were more than expected, stressing that he believed rate cuts would continue. That contrasts with the global bond market, which is either pricing in higher inflation, a higher US deficit or some sort of trade uncertainty.
In general, foreign exchange movements in US trading were small as the dollar sank slightly lower. Stocks and commodities were volatile, however, and bitcoin fell sharply at one point before recovering. Eyes are increasingly on fixed income, but the 30-year selling at 0.7bps year to date has provided some relief.
Recall that Thursday is somewhat of a holiday for the US market due to Jimmy Carter’s funeral, and Friday is non-agricultural payroll.