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FOREX: Greenback Finishes Week on Front Foot, AUD & EM FX Sharply Lower

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  • The US dollar came firmly back into favour Friday as Trump trades gained renewed confidence, aided by the cleaner positioning following the sharp post-election reversals seen late Wednesday and across Thursday’s session.
  • Accordingly, AUDUSD is the notable underperformer, declining 1.7% and erasing the entirety of yesterday’s advance in the process. The moves come amid a marginally disappointing China stimulus announcement and despite the ongoing strength for US equity benchmarks, highlighting the specific sentiment towards the greenback.
  • Similar sentiment has been prominent across emerging market currencies and a sharp 2.5% bounce for USDMXN into the close is evidence of the peso’s significant volatility this week, which traded in a 5% range.
  • Overall, the euro has weakened roughly 1.25% against the dollar this week, primarily driven by this more optimistic USD price action in anticipation of a Donald Trump led administration. However, the single currency has shown relative underperformance across G10, largely owing to Eurozone growth concerns and an escalating political crisis in Germany. Bearish technical conditions dominate, signalling scope for an extension towards 1.0666, the Jun 26 low.
  • The single currency weakness can also be seen through the lens of EURGBP, which looks set to close at its lowest level since April 2022. 0.8300 marks a multi-year inflection point for the cross and will be monitored closely in coming sessions.
  • Next week’s focus will be on US inflation data, as well as a plethora of China and Uk economic data releases.
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  • The US dollar came firmly back into favour Friday as Trump trades gained renewed confidence, aided by the cleaner positioning following the sharp post-election reversals seen late Wednesday and across Thursday’s session.
  • Accordingly, AUDUSD is the notable underperformer, declining 1.7% and erasing the entirety of yesterday’s advance in the process. The moves come amid a marginally disappointing China stimulus announcement and despite the ongoing strength for US equity benchmarks, highlighting the specific sentiment towards the greenback.
  • Similar sentiment has been prominent across emerging market currencies and a sharp 2.5% bounce for USDMXN into the close is evidence of the peso’s significant volatility this week, which traded in a 5% range.
  • Overall, the euro has weakened roughly 1.25% against the dollar this week, primarily driven by this more optimistic USD price action in anticipation of a Donald Trump led administration. However, the single currency has shown relative underperformance across G10, largely owing to Eurozone growth concerns and an escalating political crisis in Germany. Bearish technical conditions dominate, signalling scope for an extension towards 1.0666, the Jun 26 low.
  • The single currency weakness can also be seen through the lens of EURGBP, which looks set to close at its lowest level since April 2022. 0.8300 marks a multi-year inflection point for the cross and will be monitored closely in coming sessions.
  • Next week’s focus will be on US inflation data, as well as a plethora of China and Uk economic data releases.