The U.S. Dollar is in tight ranges, keeping it together as global markets absorbed the shock of Gary Cohn quitting as the top economic advisor to President Donald Trump.
His departure marks a big moment because his refusal to support the tariff proposals from last week was a sign that he would try to convince the President not to pursue the idea, but now it is clear that the anti-trade agenda will be pushed likely without anyone in the cabinet opposing or counter-arguing it. Risk-aversion is now taking over.
Reports also mention that other measures may be on the way, especially targeting China and its assets. Consequentially, stock indexes are in the red everywhere and the safe-haven Yen is stronger. We foresee some wild swings in FX as headlines over trade take over with chances of surprising developments if China or the European Union announces counter-measures of their own.
The Euro is steady at the moment after Gross Domestic Product figures met expectations. Quarter-over-quarter growth reached a 0.6% pace while the annual average stayed at 2.7%. Economically, things seem to be fine and we shall see if the European Central Bank decides to change their tone on easing on Thursday.
We highly doubt it as President Mario Draghi is predicted to maintain a very careful approach and wait until September. EU officials are concerned though about Italy and any signs of hesitation from Draghi about the impact of his homeland’s woes on the economy could sink the euro. Building a governing coalition after elections will be quite difficult.
The Yen is trading near its strongest levels since the end of 2016 after the global rout experienced overnight because of uncertainties over trade. The safe-haven tender remains a solid asset during times of crises and with fears of further “trade war” escalation; we foresee a Yen that could break a 2-year mark as risk takes a backseat for the remainder of the year.