Risk sentiment climbs after Trump signs US stimulus bill 

The US dollar moved higher in its early session but reversed these gains after President Trump signed into law the US omnibus bill releasing fiscal stimulus and funding for the US government through 2021. Trump shocked Capitol Hill last week when he threatened to veto the bill unless stimulus checks were increased, but in the end, he gave his approval, which averted a partial government shutdown. This led to a wave of risk-seeking sentiment with the Australian and New Zealand dollars both rising over 0.40%. It should be noted though, that although both have a high beta to the world economic cycle, both markets are closed today, and the gains could be as much about liquidity as US stimulus.

Elsewhere amongst the majors, both euro and sterling have risen 0.30% to 1.2215 and 1.3560 respectively. The signing of the Brexit trade agreement was a massive sigh of relief to financial markets, which had spent the last few months buying sterling in anticipation of the outcome. The fact that the world is long sterling probably explains why sterling did not leap to greater heights after the announcement last week. Nevertheless, sterling should target 1.3800 in the coming weeks. Markets are likely to wait until next week though before buying again, fearful of massive bottlenecks at the English Channel as the new rules take effect.

Asian currencies have rallied in sympathy this morning, boosted by the presidential signature. Across the region, the CNY, SGD, MYR, and JPY are all between 0.10% to 0.20% higher versus the greenback. The Thai baht remains an outlier, with USD/THB rising 0.25% to 30.110 today. The outbreak of Covid-19 just outside Bangkok has raised fears that the reopening of Thailand’s vital tourism sector will be delayed, weighing on sentiment. In the greater scheme of things though, the baht remains in a structural rally, and the weakness is unlikely to persist unless Covid-19 numbers explode.