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The dollar drops on Trump's 'America first' speech, there's a showdown looming in the U.S. Treasury market, and it's a big week for the U.K. Here are some of the things people in markets are talking about today.
The U.S. dollar was lower against all G-10 currencies this morning as traders became increasingly nervous President Donald Trump will pursue protectionist trade policies following his inauguration speech on Friday. Emerging market stocks and currencies also gained, and are headed for the highest level in 11 weeks. Analysts are watching the yen to gauge whether early Trump optimism is waning, with the 115 yen to the dollar level seen as an inflection point. The weaker dollar and policy uncertainty is also lifting gold, which was at $1213.27 an ounce at 5:13 a.m. ET.
Hedge funds and institutional investors are taking opposite sides of the Treasury market. Speculators upped their bearish bets, with leveraged funds' short positions on five-year notes exceeding longs by a record 1.1 million contracts, data compiled by the U.S. Commodity Futures Trading Commission show. Institutional investors, on the other hand, boosted their long positions in the same notes to an all-time high in January. The winner in this showdown will be decided by what kind of policies the new president decides to implement.
OPEC shrugs off Trump
The two biggest OPEC suppliers of crude to the U.S. said that despite Trump's stated commitment to achieve energy independence, the U.S. will still need to import oil. Investors seem to be siding with OPEC, with bets on rising West Texas Intermediate prices reaching the highest level since June 2014. A barrel of WTI for March delivery was trading lower at $52.42 as of 5:40 a.m. ET.
Overnight, the MSCI Asia Pacific Index gained 0.3 percent, while Japan's Topix index dropped 1.2 percent on the weaker dollar. In Europe, the Stoxx 600 Index was 0.3 percent lower at 5:45 a.m. ET, with exporters and banks leading the losses. S&P 500 futures fell 0.2 percent.
Big Brexit week
At 4:30 a.m. ET tomorrow the U.K. Supreme Court will rule on whether parliament or the government can trigger Article 50 of the Lisbon Treaty to start the two-year countdown to the Britain's exit from the European Union. On Thursday, U.K. GDP data for 2016 will be released. Economists expect the economy performed well in the period, despite the referendum. Prime Minister Theresa May will become the first foreign leader to meet the new president on Friday, when she is due to visit the White House.
What we've been reading
This is what's caught our eye over the last 24 hours.
- Odd Lots Podcast: This is how monetary policy works in the Islamic State.
- China slams western democracy as flawed.
- A bunch of companies are at risk from a U.S.-China trade war.
- The Trump era may force Europe into deciding what it wants.
- Pound bulls are emboldened thanks to sterling's recent advance.
- This time is different, European corporate-profit edition.
- On over-thinking NAIRU.