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Trump’s Threats Unnerve Markets


Concerns have risen that the US housing market recovery is stalling, as the US Commerce Department data on US new home sales dropped 9.4% last month to the lowest level since December 2016. The drop confounded many market analysts, who were expecting a 0.3% gain. A separate report on Wednesday from the US Mortgage Bankers Association indicated mortgage applications also decreased. A lethargic housing market weighs on US GDP.

Markets got more rhetoric from President Trump on Wednesday, with him warning that he might terminate the NAFTA trade treaty with Mexico and Canada after 3-way talks failed to bridge deep differences. At a political rally in Phoenix, Arizona Trump stated; “Personally, I don’t think we can make a deal. I think we’ll probably end up terminating NAFTA at some point”. Such comments again raise concerns that his administration is unable to deliver on fiscal plans and caused USD to give back recent gains.

Latest government data showed that, whilst US crude stockpiles slid last week with a drawdown of -3.327 (expected -3.450M) production was steady. The latest EIA report marks the 8th straight week of crude oil inventory declines. Production remained flat on the week at 9.5 million bpd giving further, albeit temporary, cause for optimism.

Today starts the Jackson Hole Symposium. Speeches from Fed chair Janet Yellen and ECB President Mario Draghi are not expected until Friday, however, it is not uncommon for potentially policy-relevant remarks to be made by attendees on the sidelines of the event.

EURUSD improved 0.5% on Wednesday, reaching a high of 1.18195. Currently, EURUSD is trading around 1.1800.

USDJPY rose to 109.821 on Wednesday, before USD bears pushed the pair lower. Currently, USDJPY is trading around 109.15.

GBPUSD traded in a narrow range on Wednesday and is currently trading around 1.2785.

Gold appears to be stuck in a narrow trading range of less than $10, with it currently trading around $1,289.

WTI reacted favourably to the latest EIA report, seeing it gain >1.5% on Wednesday. Currently, WTI is trading around $48.40pb.

At 09:30 BST, National Statistics will release UK Gross Domestic Product YoY and QoQ for Q2. Market expectations are for both releases to be unchanged at 1.7% & 0.3% respectively. Any deviation from the consensus will have an impact on GBP.

At 13:30 BST, the US Department of Labor will release Initial Jobless Claims for the week ending August 18th. Consensus is calling for an increase to 238K from the previous 232K. At the same time, Continuing Jobless Claims for the week ending August 11th will be released. Consensus is calling for a slight reduction of 1.950M from the previous release of 1.953M. Whilst a reduction is expected the markets are unlikely to buy USD unless it is significantly lower than expected.

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