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Trump Attempts Diplomacy: Fails

Trump Attempts Diplomacy: Fails


Visit to Riyadh masks domestic problems


President Trump decamped to Riyadh over the weekend at the start of his first overseas trip. You would have got long odds at the time of his election that his first visit would be to Saudi Arabia, Israel, The Vatican, Italy and Belgium. It is handy that there are G7 and NATO summits in the last two to justify his appearance.


In Riyadh, he delivered an inspiring yet direct speech to GCC leaders. The White House’s words not mine. The subject was “the need to confront radical ideology”. Having seen it I would call it hectoring and disrespectful.


In Israel, Trump will meet Prime Minister Benyamin Netanyahu and also Palestinian Authority Leader Mahmoud Abbas. He will apparently assure both leaders of his commitment to finding a solution to the Israeli/Palestinian Crisis. That shouldn’t be too difficult it has only been going on for three thousand years.


Trump clearly struggles when not telling people what to do which is why he is not a great traveller. Prior to his election, he shuttled between his penthouse and office in Trump Tower in New York and now between the East and West wings of the White House, occasionally visiting a Trump property for a little R&R.


The furore over the motives for the sacking of James Comey, the FBI Director continue to dog the President despite his contention that he is the victim of “one of the biggest witch hunts in history”.


Dollar mixed as Euro flies


The dollar is struggling to make progress given the political issues and claims flying around Washington.


The chances of a rate hike next month have fallen dramatically. Even any further hike in 2017 is now being called into question.


The ability of the President to pass his ambitious tax, social reform and stimulus packages is a concern following his very public disagreements with Congress. He is unlikely to receive much help with the more controversial and divisive parts of his agenda.


The dollar index remains stable rising 0.2% to 97.29 having fallen 2.5% last week to its lowest since November 9th.


The Euro is making major inroads as the new market favourite. Having broken the 1.1000 barrier earlier in the week, the single currency now looks set to test the 1.1250 resistance area.  The single currency is also making progress against the pound. It has broken the 0.8600 barrier overnight and could be set to test 0.8650 resistance last seen at the end of Q1.


Sterling facing the unknown.


What next for the pound? All the good news is out in the open but it has stalled even against a dollar which faces headwinds of its own. The 1.3000 level was a well-supported first target for the recovery following the Brexit vote.


That rise will feed through into lower inflation but to push on particularly, following a likely landslide General Election result, a perceived tightening of monetary policy may be needed and that is unlikely in the short or even medium term.


It is hard to say where Sterling will be trading in three months let alone six! As the second quarter ends, supportive data should see some support be rekindled around 1.2820 but a sustained rally above 1.3250 is highly improbable.


It is curious that the market likes the continuity of a large Government victory at the election then frets over the lack of a credible opposition. A majority of less than twenty such as David Cameron secured in 2015 keeps the Government honest as it faces a revolt and defeat if it meanders off course. However, with a 100+ majority that safety valve is taken away.


The real election drama won’t come with the result. That will arrive with the start of Brexit negotiations. The rumours that will circulate will come from dubious U.K. Government sources and Brussels which leaks like a sieve.

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