US politics remain a significant disappointment from the high hopes early in the year and it is possible that the latest machinations at the White House are raising political risk and undermining the USD, according to Greg Gibbs, Analyst at Amplifying Global FX Capital.
Key Quotes
“This includes intense pressure on Attorney General Sessions to resign, related suggestions that the President is trying to be rid of special counsel Mueller, the outing of Spicer, a new communications director, Scaramucci, pressure on Chief of Staff Priebus to resign. Trump has reverted to misdirecting the media by tweeting about alleged wrong-doings of the Clintons and on transgender recruitment in the military. From what it is not clear, but the investigations related to Russia appear to be troubling the presidency.”
“The market is no longer as shocked by the unusual workings at the White House, but it does appear that the administration is increasingly ‘off the reservation’ and it may be disrupting Republican efforts in Congress to make progress on its agenda.”
“Prospects for significant tax reform have been diminished and pushed out. In the meantime, the debt ceiling will need to be raised soon. Budget planning and spending bills to cover the period beyond September are all meshed in with the debt ceiling negotiations. A failure to move the health care bill to a successful conclusion further adds uncertainty to this process.”
“The debt ceiling approach may keep the USD weak until resolved, probably through to sometime in October. This also interferes with the Fed’s start date for its balance sheet wind-down.”
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