Dollar Retreats after Trump Press Conference, No Mention of Fiscal Stimulus

The dollar strengthened sharply into President-elect Trump’s news conference with a USD/JPY peak above 116.80.

Trump initially repudiated the latest media speculation, which suggested that Russia had incriminating evidence on Trump and he accused intelligence agencies of leaking fake news. He did admit that Russia was probably behind the hacking attempts during the US election.

There was a presentation on his severing of control over his business interests and transfer of control of his companies to other family members.

He reiterated his determination to create a substantial number of jobs in the US economy. There were, however, no specific references of a fiscal stimulus in the opening remarks and no mention of tax reform measures.

Trump reiterated that the US needed to make better trade deals in order to combat annual trade losses with countries such as China and Mexico. He warned that businesses would not be able to move manufacturing capacity to Mexico as there would be the need to pay border taxes.

He also reiterated that he would build a wall on the Mexican border and that he did not want to wait for a year to get started. In this context, Mexico could make a reimbursement to the US through a payment or taxes rather than an upfront payment. He stated that Mexico took advantage of the US, but that he respected the Mexican government and that the fault lay with previous US Administrations.

He stated that China was taking advantage of the US economically, which increased concerns surrounding potential trade tensions.

He called Obamacare a complete disaster and pledged that the Affordable Healthcare Act would be repealed and replaced, although markets were sceptical over the timetable.

The dollar lost ground on disappointment over a lack of significant comments on fiscal policy with USD/JPY dipping below 116.00 with fears over a trade war with China also important. US Treasuries edged into positive territory, while equities were little changed after dipping into negative territory.

The Mexican peso weakened to record lows around 22.00 before finding some support.

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Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.