US: Dormant FX markets lack direction in a world of Trumpian uncertainties - ING

According to Viraj Patel, Research Analyst at ING, the White House remains front-and-centre for global markets as the coordinated air strikes between the US, UK and France on Syria over the weekend have barely rattled dormant FX markets.

Key Quotes

“Equally, the US Treasury’s FX report may have slid under investors’ noses – though admittedly it was a ‘damp squib’ given that major trading partners were only included in the analysis (Thailand was saved). But the relative inaction in the FX and bond market space may just be down to sheer confusion in a world of Trumpian uncertainties.”

“We pinpoint five US policy themes – each of which have conflicting economic implications that might well have rendered FX investors in a state of passivity: (1) trade wars; (2) geopolitics; (3) the ‘FAANG’ crackdown; (4) a Fed policy misstep; and (5) a US fiscal blowout.”

“The bottom line is that global markets lack any clear direction under these five Trumpian uncertainties. Risky assets may continue to see shallow corrections, though a ‘buy-the-dip’ mentality will endure if sell-offs are not a result of a broader shift in economic fundamentals. The $ may consolidate in this uncertain world, but the structural downside factors still outweigh and point to a further 5-10% multi-year decline.”