• Little love for USD
  • Teachable moments
  • An expensive break-up
  • Trouble at home

President Trump’s first international trip has taken off with much pomp and circumstance. Speaking to Muslim leaders in Saudi Arabia, Trump called for a joint effort to stamp out extremism, painting it as a war of good against evil. Trump then flew to Israel to meet with Israeli Prime Minister Benjamin Netanyahu. The US President hopes to kick start peace negotiations between Israel and Palestine. Trump has called this visit “a rare opportunity to bring security and stability and peace to this region and to its people.” Despite the reprieve from negative political headlines in the US, the dollar remains in a slump. The DXY US dollar index is at more than 6-month lows.

The euro was bolstered this morning by comments from German Chancellor Angela Merkel that “the euro is too weak.” While the Chancellor’s comments make for a splashy headline, we would like to note the context: Merkel was discussing trade surplus with students in Berlin, the full quote being: “The euro is too weak – and that’s because of ECB policy – and so German products are cheap in relative terms, so they’re sold more.” While this may have been an educational exercise, price action suggests that investors are taking this more seriously to reflect her support for a stronger euro. The euro has kept gains against the greenback and sits in the mid-1.12s.

Like most divorces, the UK’s break with the European Union will likely be messy – and expensive. Britain is facing a divorce bill of €100 billion for unpaid commitments, and the EU is not likely to forgive it. The EU’s negotiating directives published Monday state that the UK would need to settle any obligations and “should also fully cover the specific costs related to the withdrawal, such as the relocation of EU agencies.”

Britain will play hardball if UK Brexit Secretary Davis has anything to say about it. “Britain will walk away from Brexit talks unless Brussels drops demands to charge it EUR100bn to leave the European Union,” Davis warned in an interview with The Times. Theresa May is facing significant headwind in her campaign ahead of the snap elections in June. Polls over the weekend show that the lead her Conservative party had is narrowing, prompting her to switch gears on social care today. May called for early elections to strengthen her hand in Brexit negotiations and keep infighting to a minimum, failing to capture a larger majority in Parliament would certainly be a detriment to her position.

EURUSD: Euro is enjoying yet another morning higher against the USD after German Chancellor Angela Merkel commented that the “euro is too weak.”

GBPUSD: The pound recovered from early morning losses on news that the UK Brexit Secretary said that Britain will not pay a €100 billion divorce bill.

AUDUSD: Aussie dollar higher against the greenback as dollar weakness carries through the morning.

USDCAD: Higher oil prices and a weaker USD have propelled the Canadian dollar to a one-month high against the greenback.

USDJPY: The yen sits flat against the USD after overnight losses were erased.