The Cold Hard Facts


REFRESHING - I usually do my best to avoid market reading over the weekend, but I caught an update from Citi on the US Dollar and was left feeling a little better about my US Dollar outlook. Of course, we really don't know which way the market will go, but with all of this US Dollar bearishness in 2017, I found the piece to be rather refreshing. As you all know, I have said that I still believe there is a big run ahead for the Buck. And Citi feels the same way, echoing much of the sentiment I have already shared. The big US Dollar negative story this year has been Trump protectionism and comments of a US Dollar that is too strong out from this new administration. Of course, these comments need to be taken seriously, but at the same time, they need to be taken with a major grain of salt.

THE VIEW - As per Citi, ultimately, the administration can say whatever it wants about a weaker Dollar, but if Trump goes ahead with sweeping tax reform and aggressive fiscal stimulus and if the Fed continues to move towards higher rates, while the rest of the developed economies stand still, nothing Trump says will do anything to stop the force of the US Dollar. These fundamentals can not be denied and the Dollar will not be able to ignore them if things move in this direction. I think it's also important to remember that despite what stock markets continue to do, there is clearly plenty of stress out there around the globe and should we see that stress manifest by way of the equity market, we will unquestionably see a wave of safe haven flow that will leave the US Dollar as a primary beneficiary. I believe GOLD will also rally in this environment, but the US Dollar will be the currency of choice, especially with the SNB and BOJ doing whatever they can to avoid any lasting appreciation in the Franc or Yen respectively. 

STACKED - Moving on, today's economic calendar is absolutely jam packed. I expect we will see movement out there, particularly after a slower Monday and particularly with so much going on across the globe. China inflation, German GDP, UK CPI, German ZEW and Eurozone GDP all stand out before the market then turns its attention to the Fed Chair, with Live Link. I always enjoy watching this testimony as the Q&A is generally quite entertaining. Just as one final note for the day, I recently read an The Data That Turned the World Upside Down on the subject of the EU referendum and US election and the influence of psychometrics and social media as a method to influence the results of these major stories in 2016. It's absolutely fascinating and you should definitely check it out when you have time. 

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