USD strength
USD boosted by higher yields last week. We believe the USD could strengthen in the very short
term amid higher US Treasury yields in anticipation of greater fiscal spending. However, such
gains could be short-lived as inflation is a negative for the USD. Technically, the short-term
bullish trend in USD/JPY remains intact, with 107.50 the next key resistance. The long-term
implications for the US Dollar are unclear as prospects of higher inflation (negative for the USD)
conflict with the possibility of faster growth and Fed hikes (USD-positive). Greater clarity on the
specifics of Trump’s likely policies is one key step to obtaining greater clarity on the USD
outlook.
GBP outperformed
The GBP rose against the USD, capping a weekly gain amid hopes of stronger ties between the
US and the UK. Furthermore, a narrowing UK trade deficit in Q3 16 could have been supportive
for the GBP. This week, UK’s consumer prices, along with labour and retail sales figures, will
likely affect the GBP
Looking for opportunities
Downside in Asia ex-Japan currencies to be limited. Short-term downside pressures
notwithstanding, longer-term US Dollar gains are far from certain. We would look for
opportunities to sell USD/SGD and buy AUD/USD. For the AUD, a sustained break above 0.784
could signal the start of a new bullish trend.