Waiting on the Leader of the Free World
It is my opinion that the only things more overrated than the economic plans of the Trump administrations are pancakes but today we get to deal with both. The dollar has had a weak session in Asia ahead of Trump’s address to a joint session of Congress this evening with everything else also in a bit of a holding pattern.
Hopes vs Fears
Speeches like Trump’s tonight are typically road maps for an administration; setting out goals, grand visions and promises of spending and focus. It is the ‘focus’ that Trump’s speeches clearly lack that has the markets somewhat nervous heading into the event. A 45 minute speech justifying and rejustifying again the actions of his administration of the past 5 weeks will be looked on very poorly by Congress.
We are hoping for a speech that is heavy on cooperation with Congress and measured in terms of bluster. A plan that is heavy on promise and light on detail will not be viewed positively as would any gap in expectations between the President and the Congress on the size, scope and implementation of the changes to US taxes.
Detail crucial for dollar gains
Dollar rallied yesterday as Trump promised that he was going to “spend on infrastructure big” although his tax plan could not be fully announced and costed until his repeal and replace of Obamacare is underway. This would fit with Treasury Secretary Mnuchin’s estimation of something to happen by Congress’s August recess. Indeed, given that specific details about President Trump’s tax and spending proposals might be somewhat limited and we may therefore have to await the mid-March release of the White House budget which is for the moment scheduled on 13th March, we would be prepared to walk in tomorrow to see dollar on the back foot.
Trump speaks at 2am GMT.
The Day Ahead
Elsewhere there really is very little going on and as such we will keep the update light. Sterling has run a little higher across the board as the Brexit bill passed the House of Lords unamended.