President Donald Trump surprised the world by firing the FBI director James Comey. The White House said that the firing is related to Comey’s mishandling of the Clinton investigation, especially in July last year.
However, there are reports that the Russian investigation against Trump’s campaign has been stepped up. It seems much more likely that Trump wanted to remove a potential threat to his presidency. The result is a growing suspicion regarding Russia’s meddling in the elections and especially regarding collusion on the part of Trump and/or his aides.
Even if there is smoke without fire, the focus on this affair draws energy away from policies that markets want to see from Trump. The Administration is now focused on passing Trump care in the Senate after the narrow victory in the House. Wider markets do not care too much about healthcare but this is a hurdle on the way to tax reform.
So, a potential pushback of tax reform is not market positive.
US dollar slides
The greenback was rallying without a clear reason. The most recent jobs report was quite mixed and did not necessarily point to a rate hike by the Federal Reserve.
So, this scandal may have been an excuse for some profit taking. USD/JPY is trading at 113.75 after having reached 114.30. EUR/USD is off support at 1.0870 and getting closer to 1.09. Other currency pairs are also seeing the greenback on the back foot.
It is important to stress that the recent moves are quite shallow and the Comey firing affair may have served as a trigger but isn’t a full-fledged reason to sell the dollar on its own.