North American Open Note 01-22-2018

Market Drivers January 22, 2018
Dollar gaps down but fills the gap
Senate scheduled for another budget resolution at noon NY
Nikkei 0.03% Dax -0.05%
Oil $63/bbl
Gold $1332/oz.
Bitcoin $11600

Europe and Asia:
No Data

North America
No Data

The dollar stumbled on the first day of week’s trade after US Senate failed to come to a deal on the budget resolution and US government remained shut for the second day in a row.

The Asia open saw small gaps higher in euro and cable and gap lower in USDJPY, but all those moves were filled as the day went on with most of the majors ending relatively unchanged from Friday’s closing prices.

Still, by London open the anti-dollar bid was back especially in cable which traded to session highs of 1.3900. The pair may be getting some support from weekend comments from Francois Macron who suggested that some sort of a bespoke deal may be available to the UK.

Overall, however, the focus of the market clearly remained on Washington DC where negotiations have yet to yield any sort of a compromise on the budget deal. For now, the impact of government shutdown on the US economy should be minimal, but the risk is that the political stalemate will drag on and will begin to weigh heavy on both consumer and business sentiment.

So far, capital markets have essentially ignored any macro risks posed by the US government shutdown, but prices near record highs, the pressure to liquidate will grow with every passing day and risk or sharp sell-off will grow.

With no US data on the docket, all eyes will be back on DC where Senate majority leader Mitch Mcconnell scheduled another vote for noon DC time. If the bill can pass by 60 votes, USDJPY is sure to get a knee-jerk boost pushing the pair through 111.00. But for now the pair remains contained and could even tumble back to test 110.00 if the latest legislative effort fails.