Dollar Struggles As 2018 Begins

The first trading day of the year ended the same way as all of 2017—with the US dollar struggling. Will it be a rise in US bond yields to turn the tide in the greenback after the currency slumped in the first full trading day of the year?

The pound was the top performer on Tuesday. The Asia-Pacific calendar is bare. Most of the damage was done in European trading as strong PMIs lifted the euro and pound.

Speculative Net Longs Vs USD

As New York opened, a strong selloff hit bonds and 10-year yields rose 5 bps to 2.46%. That momentarily lent a bid to the dollar but it didn’t last.

The S&P 500 also roared to start the year in a 22 point climb to a record 2695. Tech was particularly strong, a great sign for stocks going forward. One worry was that would-be sellers were going to wait until after year-end to take their capital gains hit, but the index climbed 1.5%.

The pound in particular took advantage of US dollar weakness as cable rose 90 pips to 1.3595. That’s now within striking distance of the September high. One worry is that as news flow picks up, it will mean Brexit news also picks up. For the past year, that’s generally rattled nerves and led to selling.

Another move to continue to watch is gold as it ripped $15 higher to $1317. It was the ninth consecutive day of gains for the precious metal, a strong seasonal kick-off.

In terms of economic data, it was a slow start to the week with only the Markit US manufacturing PMI on the agenda. It was at 55.1 from 55.0 previously. The calendar remains quiet throughout Asia-Pacific trade today.

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