The Greenback recovered from its early week lull overnight, forcing its way up by 0.69% to 96.83 against a basket of currencies (DXY). Despite what the strong showing would suggest, the US Dollar was more the beneficiary of souring market optimism than any other one factor.
With very little on the economic calendar to excite markets, attentions turned to broader, macro-economic variables for direction. Concerns around the outlook for global economic growth continued to spook markets with trade tensions continuing to undermine market confidence. As the trade tensions ratchet higher in the new year, the market continues to prepare for a capacity pressure bite, cost rises and fading US fiscal stimulus as signs of things to come. Oil prices and equities markets lurched significantly lower, adding to the general volatility and risk aversion for the day. White House Economic Advisory Larry Kudlow attempted to allay fears by saying “Trump has an optimistic view on US-China trade amid ‘very detailed communications’” but this failed to stem the tide. Within this context, the Greenback showed its value as a safe-haven currency finding itself well bought and rose against a number of its counterparts.
Moving into Wednesday, the US Dollar is again set to enjoy another quiet day on the economic calendar. Direction is again set to be driven by the headlines.