TACO?
According to media reports yesterday, the access to the hall in which Donald Trump would deliver his Davos speech holds the new Guinness world record for the largest international rugby scrum. That tells you three things, 1) Air Force one was late due to a last-minute plane replacement. 2) Security even amongst world leaders is taken very seriously when the President is on parade. 3) Everyone thought something noteworthy might just be said other than pointing out Macron’s new terminator look. Unfortunately for those maimed during scrummaging and those world leaders turned away for lack of seats, no such free speaking was on offer from POTUS.
The relevance of Davos has been brought into question for some time now. Theoretically at least it seems that the threat of its demise as a meaningful and market-sensitive event is diminished when we have an often open-speaking and frequently hip-shooting President. Trump’s speech certainly didn’t support that argument. Largely read from a teleprompter and delivered without the President’s signature flare, the usual off the cuff remarks few and far between. All told, the speech was wholly uneventful. Event basic things the market had hoped to learn such as the name of the next Fed Chair were omitted. However, more than this, did Trump ‘chicken out’ again and is the TACO trade back once more?
If we look at the recovery in the Dollar and Treasury prices yesterday it certainly looks like a TACO-esque trade was afoot. As a result of skimming past hot topics such as the White House’s disappointment in the Fed’s management and the ambition to ‘own’ Greenland, the market has interpreted Trump’s Speech as a de facto de-escalation in risk. Consequently, the debasement concerns that had been the hot topic earlier in the week gave way to more stable conditions. Provided that continues, EURUSD has the ability to continue to recover some losses as the week progresses.
Discussion and Analysis by Charles Porter
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