North American FX Open - Usd on the charge on hawkish Trump trade talk

The Dollar is in the ascendancy to start the week, with the DXY eclipsing last week's peak to hit its highest level since July 3rd up at 105.509. The Euro has been the over-riding loser, across the board, after the FT reported that Robert Lighthizer, who was US trade representative when Donald Trump launched his trade war with China, has been asked to take the job again as the president-elect starts to build his cabinet team. The FT stated that the possibility of an arch protectionist being reappointed to the pivotal trade role is likely to raise concerns in Beijing, as well as among US trading allies, given how influential Lighthizer was during Trump’s trade wars during his first term. Trump has vowed to impose high tariffs on all imports into the US, particularly Chinese goods.

These concerns have hit the single currency hard, with Eur/Usd slipping to 1.0656 late in the European morning session, its lowest level since May 1st. Meanwhile Eur/Gbp has fallen down to 0.8272, its lowest level since April 2022, as the UK is set to be given preferential treatment for leaving the European Union.

Another negative affecting the Euro, is the uncertain political situation in Germany. Bbg reported that German Chancellor Scholz said he’s open to moving up a parliamentary confidence vote by several weeks to before Christmas, potentially speeding up an early election to February. The Opposition's CDU/CSU-led conservative bloc leader Merz, who’s dominating polls, remarked he would look to agree deals with incoming US President Trump to boost Germany's international standing.

Yesterday the ECB's noted hawk Holzmann stated that a December rate cut is possible but by no means guaranteed.

Also over the weekend the Fed's Kashkari stated that the US economy has remained remarkably strong as the central bank progressed in beating back inflation, but the Fed was still “not all the way home.”

On the Japanese front, a BOJ board member remarked at October 31 MPM the Bank can keep rates on hold for now as it needs to conduct monetary policy more cautiously given heightened uncertainties at home and abroad, according to a summary or opinions from the policy meeting.

Meanwhile in Japan, Ishiba became the first leader in 30 years to need a run-off to be selected as PM. FT reported that divisions among opposition parties helped Ishiba secure the most votes in the final count, defeating the main opposition leader Noda.

The US is observing Veterans Day, with bond markets closed, while equity markets are open.

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