White House Chaos Weakens the Dollar

Daily Update - 14th March 2018

Yesterday’s Market

• GBP Budget Report
• USD Consumer Price Index & CPI Ex Food & Energy

Yesterday Explained

Two primary developments on Tuesday led to a sharp fall for the already-struggling US dollar. First, the highly anticipated inflation data for February was released. Though it was in line with the expectations the lower readings could mean expectations have decreased for 4 rate hikes in 2018.

Secondly, an announcement that US Secretary of State Rex Tillerson has been dismissed and will be replaced by current CIA Director Mike Pompeo pressured the US dollar even further. Tillerson was regarded to have a moderate approach to Trump’ view on North Korea and Iran Nuclear deal and was expected to make decisions supporting a better US foreign policy.

With the appointment of Mike Pompeo as secretary of state who is viewed to carry the same hardline stance on international policies similar to Trump, the confidence of foreign leaders and foreign investors, equity market investors to dollar bulls have been shaken and this could only mean worse for the greenback in the shorter term.

Today’s Market

• EUR harmonized Index of Consumer Prices, Industrial Production & ECB President Draghi’s Speech
• USD Retail Sales

Today’s Focus

Another important day follows for the Greenback with the release of US Retail sales. Early morning, we will see the release of harmonized Index of CPI from Germany which a measure of prices used by Governing Council of EU to define and assess price stability in the euro area as a whole in quantitative terms. This is followed by Industrial production from Euro zone, which shows the volume of production of Industries such as factories and manufacturing.

 

Then comes the release of all important Retail Sales figures, which measures the total receipts of retail stores. January Retail sales recorded the largest decline ever since February last year mainly because of a decline in sales of automobiles. Hence, markets would be expecting a much more positive figure to boost the economy.

A Speech from ECB president Mario Draghi is expected to take place in Frankfurt, Germany. He will have another chance to move markets as his speech is taking place at the Institute for Monetary and Financial Stability, so he may refer to monetary policy.