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The Dollar has erased all of its gains following the appointment of Donald Trump as President, in what was Trump’s worst week in office as of yet.

  • Expectations that Trump would increase government spending as well as Tax cuts that would stimulate the economy, were responsible for the Dollar’s strength after he was elected. However, the latest negative press surrounding the firing of FBI director as well as the allegations that he has shared state secrets with Russia, have raised speculation that his economic agenda will take too much time to be realized.
  • The uncertainty this has created is evident mostly in 2 things. GOLD, which is a safe haven alternative investment has risen over $30 in the past 2 days, while the VIX index (measures volatility) rose to its highest since April.
  • Dollar weakness also evident against JPY, with USDJPY falling over 2 cents from 113+ to 111- in the last 2 days. Clearly, heightened US political uncertainty and/or a continued selloff in risk assets is a very bad cocktail for USD/JPY. EURUSD at 1.1171 is the highest since November 8th, the day of the US elections.
  • The dollar index has now fallen more than 5 percent from its 14-year high of 103.82 set on January 3, despite expectations of higher U.S. interest rates that should assist the U.S. currency. The Swiss franc hit a six-month high of 0.9772 to the dollar on Wednesday before easing back to 0.9805.
  • Asian stocks fell on Thursday too with Nikkei shedding 1.4%. Asian shares followed the drop in the US, where the Dow and SP500 both fell by 1.8% following the reports that Trump tried to influence an FBI investigation.

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