Still unable to create a settled team

Donald Trump’s inability to produce a team that is settled and able to perform reflects his Presidency so far. His inability to transition from business to government is creating a maelstrom in the U.S. administration that it is hard to see changing during the next three and a half years.

His hire and fire tactics demonstrate a complete lack of faith in his team and a lack of confidence in his own ability to “get the job done”.

This week sees the release of macroeconomic data which will provide further evidence of an economy that is faltering at best.

The economy grew at 2.6% in the second quarter despite Trump. He has, so far, been unable to produce any meaningful policies to drive the economy and the two rate hikes that have taken place in anticipation of the “Trump effect” are now looking very premature and totally driven by concern over asset prices.

The 10% fall in the dollar index so far, could be considered a blessing by U.S. exporters who see their competitiveness rise although such benefits tend to be transitory when compared to genuine economic stimulus.

Brexit transition a welcome if surprising development

It seems that the most significant development since Brexit negotiations began has taken place without either Prime Minister Theresa May or anyone from the EU being involved.  

Chancellor (Finance Minister) Philip Hammond has floated the idea of a Brexit being accompanied by a transition period where the major sticking points are ironed out by practicality as much as policy. While the U.K. can afford to be slightly more inventive in its Brexit plans, the rigidity of the EU will be tested even if they agree.

The market’s eagerness to accept any chance of a softer Brexit will surely be tempered by the further weakening of the Prime Minister’s position. A leadership challenge becomes even more likely as these veiled challenges continue. The probable main contestants are remaining visibly quiet except for Hammond who may not even see himself a Leader.

The real test of the strength or otherwise of Sterling is its performance against the Euro. This is probably also true of the common currency since the dollar is now wholly driven by the antics of the President.

Failure to breach the 0.9000 level has seen a minor correction but as the summer unfolds and political unrest in the U.K. mounts, further Euro strength is likely.

Significant data week despite political concerns

This week’s BoE MPC meeting has lost its drama following several factors that reduce the necessity for a rate hike. A fall in inflation and tepid Q2 growth as well as a cut in the IMF’s full year GDP estimate have combined to play into Governor Mark Carney’s hands.  

He has constantly been concerned over a premature hike in rates even to reverse the cut that took place in the wake of the Brexit referendum.

Purchasing managers indexes will be released in the U.S. and the Eurozone later this week and they will continue to show growth although the U.S. is beginning to falter somewhat. Eurozone Inflation data later this morning will probably be unchanged at 1.3% YoY.

The first week of the month wouldn’t be complete without the U.S. employment report. This is likely to be even more unreliable than it has been recently as the Bureau of Statistics only has three days to concoct (analyse) the data. A revision (down) of June’s 222k new jobs is probable with the headline falling back close to trend at between 165k and 180k.

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