Trump; Naive or Calculated?
Disregard for protocol concerns observers.
Despite his bluster, propensity for shooting from the hip and a solid, unshakeable belief in his own ability, President Donald Trump is not easy to fathom.
Does he really believe he can do and say what he wants and carry public opinion with him using promises that things can only get better as his only concrete policy?
His approval rating is falling as he grapples with the whole Clinton email / FBI / Russia mess which is to a significant extent of his own making.
The dollar index had been rising until recently as risk appetite was spurred by political events in France and South Korea. Now, traders are looking at the Trump Presidency as more than a purely domestic matter. There have even been reports of ground for impeachment over his handling of James Comey.
Should the situation worsen any thoughts of a rate hike will be pushed backwards as the Fed will have to manage a political situation which could quickly spill over into an economic one.
The dollar index has retraced back through 99.00 but support in the 98.80/60 area looks solid (for now).
Macron chooses Centre Right Le Havre Mayor as Prime Minister.
Edouard Philippe a right leaning member of the Les Républicains, the party that was headed by Nicolas Sarkozy until last year is the new French Prime Minister. He has been charged, by President Macron, with the task of securing a majority for the new En Marche party at next month’s election. That is a task that will be easier said than done.
Macron’s inexperience in Government will be highlighted by his opponents but his determination to clear the “relics” of past administrations has been demonstrated by his choice of a Prime Minister who has never held national office. This will chime with his supporters but may be exploited particularly by the right.
The Euro is looking likely to push through the 1.1000 barrier against a dollar that is under pressure but Sterling continues to show good strength against the single currency.
The pound is riding the tailwind of politics as the ruling Conservative Party hold an 18% lead over the main opposition Labour Party in the June 8th election.
Data releases to set tone for the rest of the week.
Despite politics providing sentiment to the market, it is economic developments that provide long term trajectory for currencies.
Today sees the release of Q1 ‘17 GDP data for the Eurozone. Growth has picked up somewhat but many observers cite last week’s downbeat assessment from ECB President Mario Draghi as a concern that growth may not be as strong as anticipated. No change from Q4 ‘16 is the markets core view. That would see growth of 0.5% QoQ leading to 1.7% growth YoY.
It remains to be seen just how much “advance guidance” Sr Draghi was giving. He is not as disposed as his colleagues Carney and Yellen towards providing more information than is necessary.
In the U.K., it is inflation report day. Since last week’s Quarterly Inflation Report. The counter-intuitive view of higher inflation yet a longer wait for a rate hike has been fully digested.
There will be attention paid to the Producer Prices part of the report. This provides more tangible advance guidance as to future price strains. The fall in Sterling following the Brexit referendum has now fed through into factory gate prices and the subsequent, partial, recovery should see a halt to further rises.
It appears that there will be a landslide victory for the Conservative Party in the U.K. General Election but attention could then turn to the downsides of a weak opposition and Sterling could see another, albeit shallower, correction.