Dollar lower as son releases email chain
It may not be the smoking gun that finally buries Donald Trump’s Presidency but the admission from his son yesterday that he met with a Russian lawyer in the run-up to the election casts further concern over the whole affair.
Trump Jr. was informed in advance of the meeting that the lawyer was in possession of incriminating evidence against Hillary Clinton that would derail her election campaign. Both Trumps have confirmed that the President was unaware that the meeting was scheduled or had taken place despite its venue in Trump Tower in New York.
The dollar fell as the Trump Presidency received yet another setback. This bombshell was followed by some good news however, as it was announced that the administration would delay its summer recess to allow for certain nominations to be confirmed and for work on legislation to be completed. This means that the President’s tax reform and fiscal stimulus packages will see some progress.
It seems that Trump Jr was about to be “outed” over the meeting by the New York Times that had obtained copies of the email chain.
The dollar index fell by 0.5% after this news but recovered a little following the announcement of the delay in the summer recess.
FOMC Members Dovish comments precede Yellen Testimony
Fed Chair Janet Yellen will today start her twice yearly two-day testimony before Congress and the House of Representatives. She will defend the Fed’s performance over the first half of 2017 in which it hiked rates twice following a hike in December 2016.
Commentators and analysts will study Yellen’s words for some clue as to when the market can expect the Fed to start to reduce the size of its balance sheet bloated by asset purchased linked to the Financial Crisis.
Globally, Central banks are starting to consider reining in extraordinary measures taken to encourage economic activity during the slowdown. The Bank of England and ECB are considering ending accommodation.
Fed Governor Lael Brainard commented that any change to Fed policy should be data driven and provided employment growth data “hold up” the reduction could begin soon.
Patrick Harker President of the Philadelphia Fed, a voting FOMC member, also commented on the economy saying that the Central Bank could hold off on another rate hike if inflation remained below 2%.
The dollar continues to benefit from widening interest rate differentials both actual and expected, particularly against the JPY where accommodative interest rate policy now appears to be imbedded in the Japanese constitution!
Sterling buffeted by Politics and Economics
A senior member of the Bank of England yesterday commented that failure by the EU and U.K. to reach agreement over the U.K.’s continued membership of the single market could prove disastrous for both economies but in the end the U.K. would come off worst.
Ben Broadbent, studiously avoiding talking about his voting intentions at next month’s MPC meeting still managed to push the pound lower.
Broadbent is Deputy Governor for Monetary Policy and has continually voted with the Governor to keep rates unchanged.
The MPC meeting on August 3rd is fast becoming a pivotal factor in the economic debate as the economy continues to slow and inflation rises.
Today’s release of unemployment data will likely confirm that real wages continue to fall as the growth in hourly earnings suffers. Sterling fell to eight-month lows following Broadbent’s speech breaking through the 0.8900 level and reaching 0.8940 against a broadly stronger Euro.
The single currency has been out of the limelight recently gaining by default as both the U.K. and U.S. face political and economic headwinds.
