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By xemarketanalysis May 17, 2017 1:28 pm
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    XE Market Analysis: Trump Headlines Drive Risk Aversion

    OVERVIEW

    • Markets have become increasingly risk averse as the Trump-Comey saga unfolds with revelations that the President urged the former FBI director to drop an investigation into former NSA director Flynn.
    • Eurozone inflation for last month was unchanged from the flash estimate at 1.9% in line with the ECB’s target, while core inflation remains way off their target at 1.2%.
    • South African retail sales grew unexpectedly in March, rising 0.8% year-on-year and should help the country avoid a technical recession.
    • Australian annual wage growth held at 1.9% in the first quarter of the year, its lowest on record as consumer confidence also weakened.
    • US stock markets are down heavily today, though oil prices have managed to strengthen marginally on lower inventory numbers.

    HIGHLIGHT

    UK unemployment fell unexpectedly in March and now stands at just 4.6%, its lowest level since 1975 after another strong rise in the number of people in work in the January-March period. Annual wage growth slipped to 2.1%, the weakest increase since July last year. This means that pay that was adjusted for inflation fell by 0.2% in the first three months of the year. 

    US DOLLAR

    The Dollar remains on the defensive as speculation regarding the future of the President rises. The Dollar index has now reversed all the gains it made following Trump's victory in November as the market loses faith in the administration’s ability to deliver on its pro-growth/tax reform agenda. 

    BRITISH POUND

    The Pound rose to 1.2990 versus the Dollar, stopping just short of the psychological 1.30 level but hitting its highest level in almost eight months. The much stronger than expected unemployment data is surprising given recent signs of a slowdown in growth and all the warnings of Brexit. It should add weight to the governing Conservative's message that the party is best for the economy and for creating jobs.

    EURO

    The Euro remains a firm undertone hitting a fresh 6-month high versus the Dollar. Short-term resistance is found at today's high of 1.1150, but further negative headlines from the White House would likely put the Dollar under additional pressure. A move to 1.13 is possible. 

    CANADIAN DOLLAR

    The Loonie is quiet and is failing to take advantage of a weaker Dollar as the political risks weigh on the commodity-linked currency. The Canadian Dollar upside remains contained by the layers of resistance below 1.36 which looks like they will be threatened further this week. 

    AUSTRALIAN DOLLAR

    The Aussie Dollar is treading water again today but has recovered from an initial sell-off following the wage growth data that remained at a record low. 

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