US MORNING: All about the US Dollar

Fed aims to contain US dollar strength before the markets open

Oil falters as Russia oil talks hopes fade

Stocks trade higher after New York opening

US dollar strength

“A strong US dollar is in the interest of the United States of America.”

This has been the mantra for pretty much every US Treasury Secretary in recent decades. Today, however, is different. The problem is not that the US dollar isn’t strong, but the amount of jawboning that the global reserve currency is taking is flabbergasting.

After a strong USD rally overnight, the US Federal Reserve came out this morning with another unexpected announcement. The central bank has agreed to open swap lines with other central banks who hold US treasuries at the Fed and provide them with USD liquidity to alleviate the global reserve currency shortage.

As demonstrated by the difference between the overnight lending rate and the 3-month USD LIBOR in chart above, there is still ample demand for US dollars - rates on the open market are still higher when compared to the US central bank’s rate.

The Fed’s actions this morning were designed to alleviate the situation, but ultimately depend on the amount of collateral which foreign central banks have at the NY Fed. At writing the EURUSD pair is trading off session lows, just above 1.0985.

US Tech Stocks Rally Leads the Way

The tech-heavy NASDAQ index is leading US stocks higher as risk appetite continued to return to the market after the US Fed’s latest decision. European and Asian stocks also traded higher, albeit modestly so.

Trump-Putin Call Does Little for Oil

A significant amount of chatter surrounded an impending call between President Trump and Russia’s leader Vladimir Putin. The oil market rallied over 10% off the lows marked yesterday only to encounter renewed selling pressure as the leaks from the call failed to reassure markets any immediate pause to excess production is on the cards.

WTI crude oil traded at $20.50, after sliding over 7% off from a high marked earlier in the session just above $21.50 per barrel.