Trump reflation trades unwinding - BTMU

Analysts at Bank of Tokyo Mitsubishi explained that the US dollar has started the New Year on a softer footing as the Trump reflation trades have lost some momentum which is encouraging a lightening of elevated long US dollar positions in the near-term.

Key Quotes:

"President elect Trump’s press conference failed to provide a fresh catalyst to reinvigorate the reflation trades. More focus was placed on protectionist trade policies which have weighed on the US dollar as well. Position adjustment could extend further in the week ahead leaving the US dollar vulnerable in the run up to President elect Trump’s inauguration on the 20th January."

"The release of the latest US retail sales and CPI reports for December will be scrutinized to assess if the US economy continued to expand more solidly alongside building inflation pressures. Fed Chair Yellen is also due to take in part in a discussion which could garner some market attention."

"The main focus for the euro will be the upcoming ECB policy meeting. It could offer some modest support for the euro if President Draghi acknowledges further evidence of strengthening growth momentum and higher inflation in the euro-zone although policy will remain comfortably on hold."