US Dollar remains under pressure as political woes hamper Trump presidency

Headlines

• USD Markets react negatively to appointment of US special prosecutor
• GBP benefits from strong inflation and retail sales
• EURO hits fresh 2017 highs as German producer prices beat expectations

GBP

Positive polling for the ruling UK Conservative party ahead of June’s general election is prompting some analysts to reconsider year end forecasts for GBP sterling. However the commencement of difficult Brexit negotiations after the June 8th vote has led some forecasters to predict a Sterling dip before a recovery into year-end. Principled Finance endorses this view with a number of client’s buying USD forward protection as spot rates trade above the 1.30 level. Against the Euro a more positive outlook is seen for the Eurozone leading GBP to fall 2.2% vs the Euro on the week.

USD

Comments Friday from US Fed member Bullard that US interest rates may have moved too fast too soon helped maintain selling pressure on the US Dollar. The principle driver of the recent sell-off has been the appointment of a US special prosecutor to investigate links with Russia which has undermined the Trump presidency and led to the emergence of general “risk-off” sellers of US assets.

EUR

Euro continued to rally vs USD hitting highs for 2017. Firm economic data out of the Eurozone and no shocks from the French presidential elections have helped maintain the positive sentiment. Commentators are predicting the firmer bias for the Euro will be reinforced by a more hawkish stance from the ECB meeting in June, raising the prospect of Eurozone interest rate rises on the medium term horizon.  

CAD

Better than expected inflation and retail sales coupled with a pick up in the Oil price have all helped to support the CAD. Analysts whom Principled Finance have spoken with, expect this to continue with the short term outlook for USD/CAD seen towards the 1.345 level. 

Sentiment

Focus is firmly set to continue on the unfolding US political situation and its impact on the USD. With the special prosecutor operating in closed sessions official information may be scant, however persistent media revelations may continue to undermine the USD. Given domestic developments set to impact GBP and EUR some caution is advised with both pairs up vs the USD month to date (0.6% / 2.7% respectively) we are seeing clients sell GBP & EUR to buy USD into this recent recovery.

Historical movements

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