Already on the back foot after Trump’s forced decision to dissolve initiatives ostensibly designed to help reflate the U.S. economy, the dollar is extending declines following the Fed minutes.
Specifically, this is what’s likely weighing on the greenback:
- “Many participants, however, saw some likelihood that inflation might remain below 2 percent for longer than they currently expected, and several indicated that the risks to the inflation outlook could be tilted to the downside.”
- “Several participants noted that uncertainty about the course of federal government policy, including in the areas of fiscal policy, trade, and health care, was tending to weigh down firms’ spending and hiring plans.”
EURUSD is making new highs and USDJPY new lows, as traders fret about the viability of the reflation meme:
This is a long-running concern. For years, there have been questions about whether fiscal policy was prepared to take the baton from monetary policy.
The idea headed into 2017 (and this is why “long USD” was supposed to be a “no brainer”), was that Trump’s agenda would make the passing of that baton possible.
But, to quote an instant-classic DealBreaker line, “it seems like we forgot to correct for the data point that Donald Trump is the fucking President of the United States.”