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Trump’s reminded of trade partners

Trump’s reminded of trade partners

The EU’s Brexit coordinator met with Theresa May in London yesterday, and while he said the meeting had been constructive, he repeated calls for ‘credible proposals’ for the future ties post-Brexit.

Sterling yet again suffered from the uncertainty surrounding the B-word and caution ahead of the important March 22nd Summit later this month where the transitional deal announcement had been pencilled in. We are expecting brinkmanship and aggressive rhetoric ahead, which has so far limited investor appetite and will likely unsettle Sterling in the interim. Concerns surrounding US trade policies were significant given the UK’s interest in new trade deals and pushed Sterling lower. UK bond yields rose initially before retreating, contributing to the malaise.

The Euro pushed to 1.1180 after finding support around 1.1235 yesterday with Sterling failing to break 1.3900 despite a soft US Dollar. This morning, the Pound opens at 1.3875 against the Dollar and 1.1179 against the Euro.


The Dollar is weaker across the board due to the positive risk environment and an easing of concerns over a global trade war after top US Republicans, including Speaker of the House Paul Ryan, urged Trump not to go ahead with tariffs on imports of steel and aluminium. Trump also suggested Canada and Mexico could be exempted from the tariffs if a new NAFTA trade deal was agreed upon.

US factory orders data printed below expectations with a 1.4% decline in January following a revised 1.8% gain the previous month while there was a decline in the IBD consumer confidence index to 55.6 from 56.7. There was a slight negative Dollar impact despite the data not being Tier One as overall sentiment remained fragile.

Dallas Fed President Kaplan stated that the US is at or beyond full employment and that the Federal Reserve should raise interest rates soon. Fed Governor Brainard stated that gradual rate increases are likely to be appropriate while headwinds for the economy have changed to tailwinds. Overall, she was ready to slow or accelerate interest rate increases if the forecasts are wrong with the comments having a slightly hawkish bias.

The Dollar was unable to make any headway as trade fears undermined sentiment and the Euro pushed to two-week highs around 1.2425 on Wednesday.


The Euro is broadly higher, benefiting as a positive risk environment diverts attention from the Italian election results. A narrowing of bond yield spreads occurred despite concerns surrounding potential deadlock and strong gains for anti-Euro populist parties.

The Euro found support below 1.2350 against the Dollar yesterday morning and pushed significantly higher ahead of the New York open. Failure to push the single currency lower triggered a covering of short positions with markets also wary of selling the Euro ahead of Thursday’s European Central Bank (ECB) policy meeting, given the possibility of a change in forward guidance.

Data to watch:

10:00 EUR Q4 GDP, Yoy & MoM
13:00 US Fed monetary policy member Bostic’s Speech
13:15 US ADP Feb Employment Change
13:20 US William Dudley Speech
13:30 US Trade Balance, Q4 NonFarm Productivity, Q4 Unit Labour Costs
15:00 CAN Interest rate decision and statement
20:00 US January Consumer Credit Change

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