Good morning,
Trump still doing it his way
Headlines from Washington and a general unease in the US dollar are causes of the current strange, doldrum-like malaise in currency markets so far this week. News that President Trump had fired his acting Attorney General after she said she wouldn’t allow the Justice Department to defend Trump’s order banning immigrants from seven predominantly Muslim countries could easily have driven some of this negativity but she was always going to be out of a job soon; she was an Obama appointee.
Pivot to stimulus should help USD
The transition into power is proving a little rockier for the 45th President than it has for most and hence the dollar’s recent ambivalence. The travel ban, whatever you personally may think of it, is unlikely to damage the US economically with much significance in the short term, should it indeed stay as a 90 day program. Starbucks have committed to employing 10,000 more people as a result of the ban; jobs are being created and the economic shot in the arm that a Trump administration could and will likely deliver is set to be felt in the coming quarters.
As we have said a number of times, the exuberance of the Trump election has now melted away and the dollar’s future gains now depend on action from the Oval Office. Talk is cheap in politics and reality TV and therefore it is action that will drive additional gains in the greenback.
Fed could bolster the greenback
Tomorrow’s Fed decision is unlikely to bring a rate hike but there is a decent chance that the policy statement that is released alongside any decision to hold rates will continue the recent hawkish tones from the central bank and we think that could easily be enough to engineer a rebound in the USD.
Brexit to be debated again
Coming past the House of Commons this morning on my way into the office I could see journalists once again camped out on College Green, ready to tell the world about the latest Brexit news. At the moment, we expect debate on the amendments – numbering as many as 70 according to some reports to the short bill on the triggering of Article 50 that David Davis delivered last week.
Once again it could be a case of additional clarity bolstering the pound as has been the case in the past few weeks.
This morning’s Times newspaper is suggesting that the Government wants to invoke Article 50 on March 9th. Options markets will be pricing in additional volatility for that date, with little reason to in our opinion.
The Day Ahead
For now we have UK money supply numbers this morning ahead of Thursday’s Bank of England Quarterly Inflation Report wherein inflation will be the watchword for all policymakers. Elsewhere, the data calendar is clear and the world will once again be watching the corridors of power in the UK and US.
Have a great day