Trading Day: Extreme bifurcation | WKZO | Everything Kalamazoo
ORLANDO, Florida, Jan 27 (Reuters) – World stocks and the S&P 500 hit new highs on Tuesday, boosted by a flood of strong U.S. earnings reports, while anxiety over U.S. President Donald Trump’s policy direction sent safe-haven gold to fresh peaks and sank the dollar to a four-year low.
More on that below. In my column today I look at why Japanese authorities might still unilaterally intervene in the FX market to support the yen, even though the chances of joint action with the United States are probably quite remote.
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
Today’s Key Market Moves
Today’s Talking Points
* Dollar torpedoed …
The U.S. dollar is under extreme pressure, with the latest wave of selling pushing it to new four-year lows on a broad basis. Unnerved by geopolitics, Trump’s policies, Washington wanting a lower exchange rate, or worries over Fed independence, investors are dumping the greenback.
Like last year, the “Sell America” trade is manifesting in FX – U.S. stocks are probing record highs and Treasuries are pretty steady. Short-term technicals and momentum are not on the dollar’s side, and longer term, the dollar still looks expensive on a broad real effective exchange rate basis.
* … while safe-haven Swissie soars
Given the dollar’s travails, and with the Japanese yen suffering from domestic policy uncertainty and a plunging bond market, the Swiss franc is living up to its traditional FX status as the safe-haven king.
On Tuesday, euro/Swiss fell to 0.9163 francs. That’s the lowest since January 15, 2015, when the SNB abandoned its exchange rate cap, sending the franc up as much as 30%. Excluding that day, the Swissie has never been stronger against the euro. It is also at an 11-year high against the dollar.
* And yet, stocks to the moon!
Despite the political, policy and trade storms tearing through currency and precious metals markets, stocks are soaring blissfully to new high after new high. Strong U.S. earnings, solid growth, and confidence in the AI boom are doing the job.
The question is, how long can equities remain immune from the rising uncertainty and volatility elsewhere, particularly FX. Sharp dollar declines, especially if accompanied by selloffs in the bond market, are bound to put equity investors on edge.
What could move markets tomorrow?
Want to receive Trading Day in your inbox every weekday morning? Sign up for my newsletter here.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(By Jamie McGeever; Editing by Nia Williams)
