• USD: Unedifying events in Washington unlikely to alter FX trends - ING

Market news

7 January 2021

USD: Unedifying events in Washington unlikely to alter FX trends - ING

FX Strategists at ING note that protestors storming the seat of democracy is hardly an event expected of a first world economy, especially the US. 

"On paper this could demand an extra political risk premium of US asset markets and the dollar. However, the early judgement from US equity futures (March Nasdaq +1%) is that these events represent the final acts of an outgoing administration and instead the focus is on what a Democrat controlled Congress can deliver in 2021."

"Helping to drive the US recovery is also super-loose Federal Reserve policy. Last night’s release of the FOMC December minutes make good reading and remind us that the Fed will be printing $120bn per month – with a threat to do more – probably into 2022. Despite the pick-up in US inflation expectations, it seems the Fed will have a very high bar to concluding that ‘substantial progress’ has been made towards its employment and inflation goals."

"Reflationary Fed policy looks here to stay and assuming the post-Covid recovery story is not seriously challenged, it looks like equity and commodity markets should stay bid."

"Softer US jobs data (ADP yesterday, weekly claims today or NFP tomorrow) look unlikely to change the narrative and we expect the dollar to stay soft. The 88.25 February 2018 low is a clear target for the DXY."

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