Trump bemoans dollar again

It’s been a while since the US president expressed his dissatisfaction with the strength of the

dollar, but he was at it again over the weekend. Following Trump’s comments, the US

currency did slip ever so slightly on the opening last night, but generally the reaction was

extremely muted, a kind of digital yawn if you like.

In repeating his criticism of the Fed for the level of the dollar he merely underscores his own

ignorance of what is equally behind the US currency’s elevated position. The very thing that

he himself seeks to promote- relative economic outperformance. So, if you truly want ‘To

make America great again’ Mr Trump then accept there’s a price to pay for the success of

such an aspiration- a dollar price!

Anyway Trump has made his opinion known several times now, so continued repetition may

prove counterproductive, if it hasn’t already. At the end of the day, the dollar is like the tide,

it ebbs and it flows, so ride it on the way in, and ride it on the way out, but sometimes you

simply have to wait for it to turn first.

Assuming the markets can look beyond the politics on all fronts there are a number of

important economic releases/central bank decisions due this week. The headline of all those

(noted below) is the RBA, BOC and ECB monetary policy decisions concluding with the US

monthly jobs numbers on Friday. Whilst no policy changes are expected anywhere this

week, as is often the case, it will be the soundbites and statements that could have the most

impact.

So, with the dollar pretty much disregarding the US presidents displeasure, the USDJPY is

largely unchanged as it hovers around the 112 mark. That in turn has continued to have an

impact on gold which has fallen further since Friday, dropping through $1300 and

approaching $1290 ahead of the European reopening today. Understandably the moves in

the JPY and Gold are again being underpinned by US yields with the 10year higher again too, trading around 2.76% this morning.

The pound did lift on the Asian opening, snapping some of Friday’s losses, on further

optimism that the EU will offer some sort of olive branch on the backstop. As to whether or

not that is the case, and in turn would be enough for a parliamentary consensus remains to

be seen. Beyond that and all of the above, it just leaves the two main events this week

which could impact the markets: the ECB policy decision and the US monthly payroll report

due on Thursday and Friday respectively.

The ECB in particular will be in the spotlight for signs that just maybe Draghi will look

through the recent economic weakness and that might provide a fillip for the EUR, but

personally I remain doubtful that he will. The markets will also be on the lookout for signs of

US wage inflation (or lack of it) on Friday which if nothing else will surely further annoy the

US president if that does lead to higher yields and a firmer dollar.

Whilst the EURUSD itself is continuing to give a very good impression of a comatose patient

that surely cannot last forever can it? At some point it will either emerge from that or someone will have to take the decision to switch off the life support machine. The nearest

points of interest for me now reside around 1.1225 where this is a pretty clearly defined

double bottom in place and thereafter at 1.1185. The latter if broken could be decisive for

the next move. Conversely, a break above 1.1450 could also endorse the opposite.

However, all the time the EUR is the perceived funding currency of choice it will require

something of a fundamental change in current ECB policy or at the very least, some sign that

a change will be coming sooner rather than later.

The markets are now even more seriously buoyed for a good outcome in the China/US trade

talks than they were this time last week. Once again the weekend the press would have us

assume that a deal is nigh. Much of this seems based on optimism with scant hard detail, so

a healthy degree of scepticism is still warranted I feel, but the signs are increasingly positive

all the same.

Meantime, the US president can bleat and moan all he likes about the dollar and the Fed,

but increasingly all he might get back are the echoes of his own rhetoric as he stands

barefoot on the beach, barking at the tide!

Important Economic Releases Due this week

05/03- 3.30am Reserve Bank of Australia (RBA) Monetary policy decision

Benchmark rate expected unchanged at 1.50%

05/03- 9.30am UK CIPS February Services PMI Index

06/03- 12.30am Australia Q4 2018 final GDP revision

06/03- 1.15pm US ADP February private payroll report

06/03- 3.00pm Bank of Canada Monetary Policy Decision

Benchmark rate expected unchanged at 1.75%

07/03- 12.45pm Eurozone- ECB Monetary policy decision

No expected changes to all the benchmark rates

07/03- 1.30pm ECB post policy decision press conference

08/03- 1.30pm US February monthly Jobs report