Dollar Falls as Treasury Pick Tempers Trump Bets: Markets Wrap

The dollar fell and Bitcoin’s rally stalled as traders viewed Donald Trump’s pick of Scott Bessent for Treasury Secretary as a measured choice, tempering some of the more fevered bets spurred by the president-elect’s victory. 

The greenback declined against major peers with the Aussie and euro leading gains, while Bitcoin fell below $97,000 before paring losses. Equity futures in Australia and Japan point to early gains Monday after US stocks rose 0.4% on Friday. Contracts in Hong Kong were steady. 

The early moves indicate elements of the so-called Trump Trade are cooling after the incoming president named Bessent, who runs macro hedge fund Key Square Group, to oversee the US government debt market, tax collection and economic sanctions. While Bessent indicated he’ll back Trump’s tariff and tax cut plans, investors expect he will prioritize economic and market stability over scoring political points.

“Following his other nominations, and the drawn-out battle among the contenders for the Treasury job, you could literally hear the sigh of relief from financial markets participants in the US when Bessent was announced,” Erik Nielsen, chief economics advisor at UniCredit Bank GmbH wrote in a note to clients. 

Bessent’s nomination may ease some concerns over Trump’s impact on other countries’ economies and currencies around the world. 

The dollar has now climbed for eight straight weeks, the longest advance in more than a year, as traders continued to price Trump’s fiscal policies including sweeping trade tariffs and persistent economic growth. The euro fell to a two-year low and the Swiss franc slid to the weakest against the greenback since July as speculative investors turned the most bullish on the dollar since late June. 

US stocks rose on Friday, with the S&P 500 gaining 0.4% as beneficiaries of the incoming administration’s looser regulation and business-friendly stance climbed. The Treasury curve flattened, with yields on 2-year notes climbing after strong US business activity data. Benchmark 10-year yields edged lower. Australia’s equivalent fell seven basis points in early Monday trading.

The ongoing conflict in Ukraine helped to push West Texas Intermediate crude above $71 a barrel while gold traded at over $2,700 an ounce, and had its best week since March 2023. 

This week, traders in Asia will be closely monitoring Japan’s inflation data after Bank of Japan Governor Kazuo Ueda last week indicated the December policy meeting is live. The Reserve Bank of New Zealand is expected to cut its key rate on Wednesday. 

Elsewhere, a swath of inflation and growth readings in Europe are due. The Federal Reserve’s November meeting minutes, consumer confidence and personal consumption expenditure data, the central bank’s preferred gauge of inflation, will be closely parsed to help assess the outlook for rate cuts next year.

“Equity bulls will want to see a healthy bounce in the consumer data, married with a below consensus read on PCE inflation,” said Chris Weston, head of research at Pepperstone Group in Melbourne. “With US swaps now implying a 36% chance of a 25 basis point cut from the Fed on 18 Dec, weaker US data would see pricing for a 25 basis point cut rise back above 50%, which should support equity risk and be a headwind for the US dollar.”

Some of the main moves in markets:

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