US dollar rally set to continue

US dollar rally set to continue

The US dollar should continue its recent rally after the inauguration of President-elect Donald Trump at the end of the week, according to micro-investing service Acorns.

The US economy’s divergence from Europe and Japan should continue to propel the strength of the US dollar, said Acorns chief executive George Lucas, with the current “breather” a reaction to the current hesitation in equity markets.

“Equity markets are hovering in limbo this week as they sit and wait for Trump’s inauguration on 20 January before deciding which way they will go,” Mr Lucas said.

“Some had hoped to get more of a steer from the President-elect at his press conference last week (the first since his election victory), however it was decidedly short on policy detail. This left markets wondering what was in store under Trump.”

Mr Lucas said the Australian dollar was unlikely to benefit from interest differentials but noted that risk appetite, commodity prices and growth, both domestically and in China, would all be supportive of the currency.

“We learnt during the week that Chinese exports and imports jumped in November driven by stronger external demand, domestic recovery and rising prices,” he said.

“We expect trade to have improved further in December, with PMI readings suggesting that China's trading partners continued to experience strengthening growth at the end of 2016. Rising commodity price inflation should have also provided a boost to trade values by increasing export and import prices.”

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