Up-and-down journey for the USD on misunderstood Obama comments

The main source of traction for FX markets in the early stages of trade stemmed from comments made by a French official who suggested that US President Obama believes the strength of the USD is a problem for the US economy. This subsequently saw a fast-money move lower in USD against its major counterparts with USD/JPY slipping just shy of 50 pips given the rarity of FX specific comments made by the US leader. However, this was then later rebutted by the White House and Obama himself saying that the comments were taken out of context and as such USD then erased some of its earlier losses but sentiment for the greenback nevertheless remained dampened.

In terms of the latest developments for Greece, weekend reports suggest that tensions between Greece and their creditors continue to remain high with Juncker dismissing Greek claims that a deal is in sight. However, in terms of price action for EUR, the multi-block currency remained relatively insulated to these comments given the broad weakness seen in the USD. Furthermore, the divergence between US and European yields also proved to be supportive as Bunds continued their recent sell-off while USTs pared some of Friday’s steep NFP inspired losses.

Elsewhere, USD/TRY printed a fresh record high, while Turkish stocks were down 10% in the wake of the Turkish elections over the weekend which showed PM Erdogan's AK Party failing to secure a single-party government. Weakness in the USD-index granted AUD some reprieve after the antipodean was weighed on overnight following the latest Chinese trade balance. Although the headline showed a third largest surplus on record, the import component fell well short of expectations which saw AUD drift lower given Australia’s trade ties with the Chinese economy.