It’s been a bad two weeks for Donald Trump.
On Tuesday evening, just when you thought it couldn’t possibly get any worse, it did when James Comey effectively called bullshit on Trump’s Twitter threat regarding the existence of “tapes” that purportedly document conversations between the President and the former FBI Director.
Comey, in a move that poured gas on an already raging political fire, leaked a memo to the NY Times that suggests Trump was engaged in what looks like a clear-cut effort to obstruct the FBI’s investigation into his administration’s ties to the Kremlin.
Promptly, betting odds on his impeachment soared and the media was whipped into a veritable frenzy.
Well, it looks like the tide may be turning on the market’s ability to look past America’s constitutional crisis. Below, find a quick rundown of analyst commentary on the latest out of Washington.
The yen gains and the euro strengthens to a six-month high against the dollar, while emerging-market currencies are mixed, amid growing concerns over the ability of President Trump’s administration to implement economic policies effectively. Trump is reported to have asked then FBI Director James Comey to shut down an investigation into Michael Flynn, the former national security advisor. Separate reports previously showed that the U.S. president shared terrorism intelligence with Russian officials, an action he has since defended.
- Mizuho Bank (Vishnu Varathan, senior economist in Singapore)
- The weaker dollar is due to “political curve balls,” specifically, developments in the Comey and Russia issues that may undermine the President Trump’s political capital, and potentially his legitimacy; that’s inconvenient in gaining traction with tax reform negotiations as well as passing the Health-care bill through the Senate
- Dollar may not reverse its slide versus euro and the yen, but for emerging currencies, the risk is that equity wobbles and wider risk aversion may threaten, or possibly reverse, their recent advances
- ANZ (Shigeki Yoshitoshi, head of Japan FX and commodity sales in Tokyo)
- USD/JPY is being affected by risk-off sentiment emanating from the U.S.; concern is the U.S. equities market, which until now has been resilient to concerns over Trump administration, may be impacted
- A collapse of the U.S. stock markets may raise the risk of USD/JPY falling to about 111.25
- However, some buying interest is likely closer to 111, which may keep the pair above 111
- Oanda (Stephen Innes, senior trader in Singapore)
- Another political storm puts stock markets under a cloud and investors are deeply concerned that all political noise will morph into economic risk as the speculation and dirty laundry could detract from Trump’s key agenda, tax reform
- ANZ (Khoon Goh, head of Asia research in Singapore)
- The extent of the impact of the Trump news on the USD isn’t clear, while the weakness in Asian currencies this morning is likely due to some retracement after the strong run recently