The U.S. dollar closed the week lower against the G-3 currencies as forex players weighed President-elect Donald Trump’s first press conference on Wednesday since winning the election, and a well-received 10-year Treasury note auction that exacerbated the inverse relationship between demand for the dollar and Treasury yields. The combination of both events on Wednesday drove USD/JPY to its lowest level in a month.
The Trump-rally in the dollar was already unraveling before Wednesday’s press conference. But selling pressure intensified on Trump’s noticeable omission of plans to increase fiscal spending, lower taxes and repatriate billions of dollars in overseas corporate profits, the backbone of the dollar’s 17% rally in the dollar since Election Day.
Losses were accelerated when the Treasury sold $20 billion in 10-year notes to stellar demand. The outcome pushed yields to their lowest levels in a month amid a safe-haven bid for fixed-income securities. The dollar fell to a low of 114.24 against the yen and above 1.0600 versus the euro.
Selling pressure extended into Thursday’s session driving EUR/USD to its highest level since December 8 and the USD/JPY to the 50-day moving average before bottoming out. As a result, the dollar ends the week 2.1% lower against the yen and down 1.1% versus the euro.
The British pound was again plagued by worries surrounding the UK’s divorce from the European Union. UK Prime Minister Theresa May warned the country would not keep “bits of EU membership”, sending cable spiraling lower at the start of the week. The pound briefly recovered, but wobbled on Thursday when May rekindled Brexit-worries on confirmation she would deliver a long-awaited speech next Tuesday outlining the government’s plan for Brexit. GBP/USD touched a 3-month low of 1.2038, recovered towards the end of the week, but closed in the red for a second consecutive week with a loss of 0.80%.