Funda wrap: White House's revolving door sends dollar and Tillerson packing

From a fundamental perspective of markets today, it was back to US politics with the Washington Post’ announcing that President Donald Trump fired Secretary of State Rex Tillerson around the same time as the CPI data and the dollar got whacked. Trump said CIA Director M.Pompeo will replace Tillerson.

The markets are looking for an explanation but there was no such thing given to the outgoing top diplomat - Trump likely clashed on a number of key geopolitical issues such as the Middle East, Russia and N.Korea, but the key concern here is that head officials keep leaving and the door to the White House is a revolving door as heads of positions keep getting turned over; an indicator of a White House in chaos if you like?

US diplomacy is a key theme in the markets currently dictating the direction of the US stock markets in the recent tariffs and N.Korean noise. Trump recently accepted an invitation to hold face-to-face talks with North Korea’s leader, Kim Jong-un, about the nuclear threat posed by Pyongyang, so one might ask why Trump fired his  Secretary of State at such a key time? 

These have been the same concerns markets had when Trump was running for the top global position, that his erratic and stubborn behaviour at the helm could come with severely adverse ramifications for world peace. However, his hardline tactics with N.Korea seemed to have pacified the North Korean threat, so far, forcing Kim Jong-un into submission and has encouraged potentially peaceful relationships in the Pacific. As a supporter of military restraint and negotiated solutions, Tillerson was likely not on the same page as Trump in respect to the Middle East and the tensions in the Pacific.

“We got along actually quite well, but we disagreed on things,” Mr Trump told reporters moments later about his relationship with Mr Tillerson. He said he made the decision to replace Mr Tillerson “by himself”. 

Trump's Tweet:

Donald J. Trump

@realDonaldTrump
Mike Pompeo, Director of the CIA, will become our new Secretary of State. He will do a fantastic job! Thank you to Rex Tillerson for his service! Gina Haspel will become the new Director of the CIA, and the first woman so chosen. Congratulations to all!

Elsewhere, CAD was the day’s underperformer following dovish comments from BoC governor Poloz, (USD/CAD bouncing from 1.2840 to 1.2975). 

Additional Key headlines: (Source: Live Squawk, Politico,Nikkei)

White House:

  • Trump Administration Is Looking To Impose Tariffs On $60 Bln Of Chinese Goods - Source Who Has Discussed Matter With White House Cites
  • US Pres. Trump: Kudlow Has A ‘Very Good Chance’ Of Replacing Cohn
  • US Pres Trump Demands Aides Pump Up Anti-China Tariffs – Politico
  • US Secretary Of State Tillerson: His Tenure Will Terminate March 31, Delegating Responsibilities Of Office To Deputy Secretary Sullivan
  • US Eyes Tariffs To Punish China For Intellectual Property Theft – Nikkei

Central Banks:

  • BoC's Poloz: We Don't Know What The New Normal Rate Of Interest Might Be;
  • BoC's Poloz: Likely Higher Than It Is Today But We Are Not Being Mechanical
  • BoC's Poloz: Economy May Be An Estimated 50% More Sensitive To Higher
  • Labor Market Has Become "Good Deal" Healthier Over Past Year But Some Slack Still Remaining
  • Expect Increased Investment, Labor Market Churn To Create More Supply Through Higher Productivity, Employment
  • Uncertain Processes Entail Upside, Downside Risks To Inflation; Monetary Policy Remains Particularly Data-Dependent
  • BOC Cannot Take Mechanical Approach To Policy, Even Though Interest Rates Likely To Move Higher Over Time
  • If Economy Builds More Supply Than Usual, Puts Downside Risk On Inflation; If Less Supply, Creates Upside Risk To Inflation; Boc's Job To Balance Risk

UK Chancellor’s Spring Statement:

  • UK’s Hammond: Could Have Capacity For Further Rise In Public Spending
  • UK’s Hammond: To Set Overall Path For Public Spending Beyond ‘20
  • UK’s Hammond: Inflation Seen Falling To BoE Target Within A Year
  • OBR Sees Continued Job Growth In Coming Years
  • Budget Deficit Seen At GBP45.2 Bln In 2017-2018
  • UK Expected To Meet Structural Deficit Target In 2021, With GBP15 Bln Room
  • Deficit To Be GBP10 Bln Lower In 2018 Compared With 2010
  • UK OBR: 2018 GDP Seen At 1.5% Vs 1.4%
  • - 2019 GDP Seen At 1.3% Vs 1.3%
  • - 2020 GDP Seen At 1.3% Vs 1.3%
  • - 2021 GDP Seen At 1.4% Vs 1.5%
  • - 2022 GDP Seen At 1.5% Vs 1.6%
  • UK Chancellor Hammond: Reject’s 'Doom And Gloom' Assessments

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