US dollar continues to catch a solid bid. Why?
Dollar strong in New York trade
I think the market is giving up on the stimulus trade but it's tough to say how much of a chance was priced in to begin with. After Kudlow's comments today, it's clear that the real chance is close to zero.
Two theories here:
1) There were some market participants who had wanted to get out of the way of the election but didn't want to miss out on a potential stimulus bill. They might be cycling out now, or simply worried about the coronavirus. For what it's worth, this is much more of an FX move than elsewhere. Equities are still holding on and Treasury yields are only slightly lower. If that was really the trade, you would see it more in equities than FX.
2) Less election risk. Is there are case for buying the dollar on expectations of a Democratic sweep? Certainly that would mean some heavy spending and stimulus. But you would see some knock-on effects in CAD and MXN that aren't visible today.
Overall, it's tough to string together a coherent narrative right now but that's about what you would expect 11 days before a huge election.
Looking at cable, there are just far too many weak hands. It's been straight downhill after that pop on the French fishing headline.