Trump Manages to push Dollar Lower

Weaker dollar a Trump, not Russiagate, issue.

It has been a goal of President Trump to weaken a dollar which, he feels, has been unjustly allowed to rise proving an economic and trading advantage to America’s partners.

He has got his wish as the dollar index has fallen by a little over 3% in the past week. The reason is not actually Russiagate which is a domestic matter (until Trump is impeached anyway) but the effect on his ability to do business with Congress and the economic fallout that will bring.

The FOMC meeting in June was being seen as the next opportunity to hike rates but now Janet Yellen is likely to be a bit more cautious. U.S. growth had been seen as being a little more solid in the U.S. than in either Europe of the U.K. leading to rate hikes but since the economic effect of Trump’s election victory is in danger of disappearing, so is the stimulus needed to drive growth.

The Euro has reached a level not seen since September last year. The hope is that ECB President Mario Draghi will be swayed by GDP, inflation and political factors to end his caution over the sustainability of growth Eurozone wide. So far there is little sign of that happening but with the next ECB meeting not until June 8th there is time for him to change his mind.

June 8th will coincide with the U.K. election so anyone trading Eur/Gbp is in for a lively few days!

First U.K. election doubts creep in.

The latest opinion poll regarding voting intentions on June 8th shows that support for the Conservative party has halved. This is the type of result that provides headlines but little substance. The margin for error is huge but since it is “out there” it must be considered.

Apathy on an unprecedented scale is the only danger facing Theresa May as the election approaches. She will have wished that she could have held the election sooner but in all practicality that is impossible.

Support for Theresa May was only going to go in one direction following initial predictions of a 175-seat majority. It is still likely that the majority will be over 100 which will give a more than sufficient mandate for Brexit to begin in earnest.   

The practicality of Brexit has taken a “back seat” since the election as announced. E.U. officials will have been busy forming their plans while civil servants in the U.K. have entered the period of “purdah” when they are not allowed to do anything that could provide an advantage to a candidate from either side. This started on April 22nd and will continue until the results are declared.

Euro continues to gain as Merkel weighs in

Angela Merkel, the German Chancellor, weighed into the debate concerning Eurozone monetary policy yesterday, labelling the single currency as “too weak”. You could almost envisage her having a conversation at this week’s G7 Summit with Donald Trump squirming as she tries to defend Mario Draghi.

Trump, as we all know, has given away his lack of comprehension by accusing Germany of currency manipulation. The Germans are as much a victim of “one size fits all” as their Eurozone partners.

The Euro has reached 1.1250 against the suffering dollar but, more significantly, has seen a high of 0.8665 against Sterling.