Action in Trump's dollar overnight - ANZ

Analysts at ANZ noted that the USD fell sharply as comments from Peter Navarro (head of the newly created National Trade Council) and Trump indicated that Washington’s view is that other countries gain the advantage over the US by manipulating their exchange rates. 

Key Quotes:

"In an interview with the FT, Navarro singled out Germany, saying that it continues to exploit other EU countries and the US with an implicit Deutschemark that is grossly undervalued. Trump said other countries take advantage by devaluing too, pointing to China and Japan. EUR/USD rose 0.9% and USD/JPY fell 0.7%. 

The early policy implication is that USD competitiveness could have a prominent role to play in Trump’s ‘America First’ agenda. German Chancellor Merkel tried to counteract that by saying that Germany does not interfere with the ECB and cannot influence the euro. European Council President Tusk, clearly irked by Washington’s negative view of the EU said that the new US administration placed the EU in a “difficult position” and “put into question the last 70 years of American foreign policy.” 

As the dollar weakened, US stocks were under pressure following an already weak session in Europe, with most bourses well down. Kiwi benefitted from the USD move, surging past 0.73, and is now sitting around the 80 level on a TWI basis. Sterling had a better day too, with this week seeing the last round of purchases in the BoE’s expanded QE Gilt buying programme. Oil rose a little over 1% and gold is up a tad too, but bond yields eased lower on Trump fatigue/foreign policy concerns, spurred on by weaker than expected Chicago PMI data."