As the President’s cabinet comes to look more and more modelled upon a revolving door policy, market volatility has increased somewhat. Rex Tillerson became a household name as a symbolic and quintessential original appointment within the Trump administration’s cabinet. The former CEO of ExxonMobil of ten years forfeited much of his participation in the private sector in order to join Trump’s cabinet. The appointment served as a beacon and testimony to Trump’s focus and semi-infatuation with the economy and business; one of the substantive cornerstones of his successful election campaign.
Whilst the appointment of the energy market heavyweight is not important to the success of the United States’ polity, his dismissal does follow a period of uncomfortable and unprecedented tumult within Trump’s inner circle. The decision yesterday was met with an unmistakable risk-off strategy, much to the detriment of the US Dollar. The yield on US 10-year treasury fell by as much as 5 basis points in a reaction to the news as money fled from falling equity markets and into government backed public debt.
In the risk off move, the price of safe haven assets including Gold, the Japanese Yen and the Swiss France also rose sharply. The increase in global political risk was accentuated by Trump’s announcement and concretisation of a considerable tariff upon Chinese exports to the US. The Dollar is still framed by most to be on a strongly bearish trend, with dominant expectations converging on a steady and sustained depreciated through to year-end.
Ignoring the Sterling side of the equation and the Br-elephant in the room, if these expectations are upheld, we would see cable (GBPUSD) trade close to one and a half US Dollars to the Pound and a Dollar be worth approximately 70% of the European single currency (EUR). During the risk off move, the Dollar fell by 0.70% against its more fortunate safehaven partner, the Japanese Yen and by a comparable amount against the Franc. The Dollar sunk to an intraday weak point of above 1.24 Dollars to the Euro.
Discussion and Analysis by Charles Porter