By Mike Dolan
Jan 28 – What matters in U.S. and global markets today
By Mike Dolan, Editor-At-Large, Finance and Markets
The dollar managed to get a toehold on Wednesday after a withering drop to a four-year low overnight. President Donald Trump appeared to embrace the move, saying the dollar was “great.” This adds to growing market speculation that the administration wants a more significant depreciation of what it sees as an overvalued currency.
Markets will immediately wonder if that tallies with the view of Treasury Secretary Scott Bessent. He has been tight-lipped since U.S. authorities on Friday joined Japan in a ‘rate check’ of the dollar/yen exchange rate that precipitated the latest downturn in the greenback, which has now snowballed across the globe.
I’ll get into all that and more below.
But first, check out my latest column on why a weaker dollar risks opening a Pandora’s box for global markets.
And listen to the latest episode of the Morning Bid daily podcast. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a week.
MAKING A WEAK DOLLAR “GREAT” AGAIN
The dollar’s slump on Tuesday came as selling intensified amid nonchalant comments from President Trump on the greenback’s recent weakness. When asked about the sudden dollar relapse on Tuesday, Trump said it was “doing great” and should “just seek its own level.”
The dollar seemed to take a breather first thing on Wednesday, as the Federal Reserve gets set to make its first policy decision of the year in the afternoon and Trump continues to tease the announcement of his new pick for Fed Chair.
But the prospect of another significant down-leg in the greenback may add to the Fed’s wariness about imported inflation, as dollar weakness could exaggerate the already sizeable impact on that front from tariffs.
It may also exaggerate the rebound in oil prices, and, of course, the surge in gold – which zoomed to new records above $5,300 per ounce today.
The calming of the dollar selloff was due as much to possible reactions in Europe to the euro vaulting $1.20 for the first time in four years, something that’s spurred renewed speculation about another European Central Bank rate cut later in the year.
Indeed, Austria’s central bank boss Martin Kocher warned the ECB would have to react if the euro appreciated further. Perhaps the biggest concern about another sharp slide in the dollar, which has seen one-month implied currency volatility surge to its highest since July, is that it unnerves gigantic foreign holdings of US assets.
Wall Street stocks shrugged it off and pushed higher on Tuesday, likely seeing the dollar’s doldrums as another boost to overseas earnings. And optimism remained high as investors awaited megacap results from the likes of Microsoft, Meta and Tesla after the bell on Wednesday.
Treasuries are a different matter and long-term yields jumped on the dollar drop and oil pop before stalling on news of a plunge in U.S. consumer confidence to its lowest level in more than 11 years.
Chart of the day
U.S. consumer confidence slumped to its lowest level in more than 11-1/2 years in January amid mounting anxiety over a sluggish labor market and high prices. This is likely a big concern for the Trump administration in an election year.
Today’s events to watch
* U.S. Federal Reserve policy decision (2:00 PM EST), Chair Jerome Powell holds a news conference (2:30 PM EST)
* Bank of Canada policy decision (9:45 AM EST)
* U.S. corporate earnings: Meta, Microsoft, Tesla, IBM, AT&T, United Rentals
* British Prime Minister Keir Starmer begins a three-day visit to China
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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 Mike Dolan)
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