Ahead of his highly anticipated speech in front of a joint session of Congress, President Donald Trump gave an interview in his friendly media outlet, Fox News.
Trump talks about income coming from a “revved up” economy that will pay for his planned defense expenditure. Yesterday he talked about having to make cuts in order to pay for a trumped up defense budget, no less than $54 billion in additional spending.
The US dollar is not impressed. In yesterday’s comments from Trump, we identified three issues with Trump’s plans. The president and markets are getting used to reality instead of the euphoric dollar rally that followed November’s elections.
He stresses the importance of the military and talks about tackling health care. Markets want to hear about tax cuts and infrastructure spending.
On the other hand, the greenback had the opportunity to recover on elevated hopes for a rate hike in March. The move that was originally discarded, gained momentum with an upbeat testimony from Yellen that was later echoed in the FOMC Meeting Minutes.
The Bloomberg WIRP function has surpassed the 50% threshold for a hike in March. A lot depends on next week’s Non-Farm Payrolls report and especially the wages component.
Which force is stronger? At the moment, movements are quite limited, but it seems that the dollar prefers the downside rather than the upside.
Here are the recent moves on USD/JPY. The pair is sliding with the 112 handle it likes so much.
We will later get the second estimate for US GDP for Q4 2016. See how to trade the GDP release with EUR/USD.
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