Despite Trade, Deficit Risks, US Dollar Climbing with Aspirations

03/08/2018 12:18 pm EST


Robert Savage

Partner & CEO, CCTrack Solutions

Focus today is on the ECB, trade reports from China, German factory orders and, of course, U.S. trade policy, writes Bob Savage, CEO of Track Research Thursday.

Consider the reaction of the market to the mercurial Trump policy on trade tempered today.

We are like new phone glass, more likely to crumble than crack on risk.

Today, Trump is expected to deliver his tariffs decree, despite dissent from some Republicans and push-back from many allies.

The lack of fear despite uncertainty inspires many to return to equities, doubt bonds and rebuy the USD (DXY) just in case global growth extends with inflation in hand.

The data overnight was about trade – with China’s surplus staggering and surprising. The export leap and drop in imports is enough to make clear the imbalance problem. Japan saw its GDP revised higher, its C/A surplus wider and its EcoWatchers sentiment dive.

The German factory orders missed the expectations as well – setting the stage for Draghi to sound anyway that he needs to steady the market fears about trade and reflate Europe. This game all seems a bit tired and so it goes with many noting that it’s actions not words that matter most.

U.S. rate hikes are lifting the USD eventually, despite other risks like trade, inflation, deficits and the anger of allies. The USD is above the 21-day at 89.80 with 90.29 the March 2 highs to aspire to should the ECB talk down the euro (EUR/USD) as many expect. This is a tempered market with all the issues of heating and reheating leading to less painful cracks but more useless markets as they search for real growth and returns.

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