Friday January 13, 2017 - 22:16:21 GMT
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Conventional Wisdom and The President Trump Era Is Nigh
John M. Bland, MBA
The USD traded broadly weaker late Wednesday and on Thursday, as the disappointment over the Wednesday Trump press conference carried dominated market sentiment. Nevertheless, by Friday the unit was closing well off its lows vs. the majors. Markets had been hoping to see more in the way of an the details and timing of the new administration's economic program when he takes power.
The market reaction to the Trump press conference illustrates the danger of trading on conventional wisdom. The general view in the financial press has been that the expected policies of the Trump administration will be positive for the USD and the economy. The problem is that everyone "knows" that and are already positioned for it. So the USD is "priced for perfection". Too many had bought USD ahead of the press conference and were disappointed when he was short on specifics. Thus, when USD longs started to trim their positions, there were no fresh USD buyers prepared to take the other side of the trade. This led to a sharp downward USD as the presser was reaching its conclusion. Another contributor to the market reaction is that many abroad living under Parliamentary systems do not fully appreciate how the U.S. system operates. When a new government is installed in a Parliamentary regime, it can often enact its party platform quite easily. Many do not appreciate the complexity of the U.S. political system which makes fundamental change difficult to implement and requires time with the Congress independent of the Executive branch of government. Even when Congress and the President are from the same party, the President cannot dictate policy to the legislative branch.
The week-ahead calendar will be active following the Monday U.S. holiday. The top highlights are: on Tuesday the U.K. Brexit Policy speech by PM May, a Bank of Canada policy decision on Wednesday, an ECB decision on Thursday, and the Trump Inauguration on Friday.
WEEKLY Forex Economic Calendar:
00:00 GB- PM May Brexit Speech
09:30 GB- CPI
10:00 DE- ZEW Survey
09:30 GB- Employment
13:30 US- CPI
14:15 US- Industrial Production
15:00 CA- Bank of Canada
00:30 AU- Employment
12:45 EZ- ECB Decision
13:30 US- Philly Fed
13:30 US- Housing Starts/Permits
16:00 US- EIA Crude
01:00 US- Yellen Speech
13:30 CA- CPI/ Retail Sales
16:30 US- Trump Inauguration
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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