US Dollar weakens as Trump U-Turns

Yesterday’s markets

13th April 2017

  • GBP - Average Earnings Index 3m/y: 2.3%
  • GBP - BOE Gov Carney Speaks
  • USD - President Trump Speaks

With the US Federal Reserve Board set to make further interest rate hikes this year, last night Donald Trump told The Wall Street Journal he would prefer them to keep the rates low. Mentioning how the Dollar is “getting too strong”, due to the growing confidence in America, Trump is worried the Dollar’s strength will eventually hurt the economy. Trump also mentioned how he might keep Janet Yellen on when her term finishes in 2018. This is a U-Turn for the President, who previously said Yellen should be ‘ashamed of herself’ for keeping rates low through Obama’s presidency. The US trading session saw the Euro and Sterling rise sharply against the Greenback.

During the Presidential campaign, Trump promised to brand China as a currency manipulator, but last night he made another change in his stance, mentioning how they are “not currency manipulators” to The Wall Street Journal. This change comes after Trump spoke with the President of China to discuss Kim Jong-Un’s regime and North Korea. Chinese President Xi Jinping has said he is willing to work with Trump to end the North Korea nuclear weapons program. However, he wants to ensure this is done peacefully. Accusing China of being a currency manipulator, could damage this relationship.

Meanwhile, in Moscow, Rex Tillerson, U.S. Secretary of State, met with Russian leaders to discuss Russia’s support for President Bashar Al-Assad’s regime and the future of Syria. The G-7 leaders also urged Russia on Tuesday to help resolve the crisis in Syria. However, after the airstrikes last week, the relationship between Russia and the US looks to be deteriorating. With tensions rising between the US and the East, demand in the safe haven currencies looks likely to increase.

The UK yesterday saw the release of the UK Average Earnings Index, Claimant Count Change and the Unemployment Rate. Unemployment rate remained sticky at 4.7%, continuing the downward trend we have been seeing in unemployment since 2012. Despite this, the Claimant Count Change increased from -6.1K last month to 25.5K, showing there has been an increase in the number of people claiming unemployment related benefits in the last month within the UK. The UK Average Earnings Index registered a stronger than expected 2.3%, resulting in cable pushing past a key psychological level shortly after the release. However, the rise in wages was to be expected, as inflation earlier this week increased above the Bank’s target of 2%.

Today’s markets

12th April 2017

  • CAD - Manufacturing Sales m/m
  • USD - PPI m/m
  • USD - Unemployment Claims

Today is the busiest day of the week in the US, with release of the PPI, unemployment claims and the UoM Consumer Sentiment. The US PPI is expected at 0%, and has posted higher than expected for the last four months. Unemployment claims is expected at 242K and will be closely watched after posting much better than expected last week. Also released is the first reading of the UoM Consumer Sentiment, expected at 97.1. With this reading, markets will gain an insight into the financial confidence in the current and future economic conditions of the world’s largest economy.