Stocks were under pressure on Monday following the collapse of Donald Trump’s first attempt to overturn Obamacare. For many, the healthcare bill has been the moment that crystallised the risk of economic failure under The Donald. Ironically, the reaction in currency markets to his healthcare failure will suit Donald Trump. Trump wants to improve the competitiveness of US companies abroad and a weaker dollar will help him deliver it.      

The unwind of the Trump trade spread to Asia and Europe. Bank stocks were amongst the biggest losers as traders pared back hopes of deregulation in the US. Last week’s sharp fall in iron ore as well as other industrial metals hurt mining stocks. A triple whammy of strength in the pound and falling bank and mining stocks sent the FTSE 100 to its lowest in a month.     

The negative reaction to Trump’s healthcare setback makes sense but there could be some silver-linings to be gleamed once the dust settles. Trump the dealmaker President will want a success to offset this failure. With its wings clipped from failed healthcare reform, the White House may pursue tax reform that is more likely to survive the rigor of Congress.   


USDJPY is edging closer to 110 with the US dollar down across the board again on Monday. Part of the reason the dollar can’t shake off the bearish sentiment is that President Trump and Treasury Secretary Mnuchin described the dollar as too strong. Basic economics suggest a border adjustment tax is dollar-positive, but the new administration could advance other policies designed to weaken it. Positioning was very dollar bullish at the start of 2017 so the political risk is causing an unwind, despite the Federal Reserve lifting interest rates in March.

GBPUSD broke above 1.26 to hit the highest since early February while EURGBP was slightly lower. A seven-week high for Sterling three days before the Government triggers Article 50 was probably not quite what ‘Project Fear’ had in mind. Another Sterling swoon once Article 50 is triggered and issues like the EU exit fee provoke fears of a hard Brexit seems likely. But it also seems increasingly apparent the market believes Sterling is undervalued.

EURUSD struck 1.09 for the first time since October 12. A political triumph for Angela Merkel’s party in the Saarland state election and the popularity of Emmanuel Macron in France both suggest 2017 may not repeat the populist uprising of 2016. The perception of diminishing election risk in France and Germany coupled with dollar-weakness has come to the rescue of the euro.

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