Donald Trump’s first press conference since the election did little to assuage investor’s concerns on his administration’s policies. Instead of setting the agenda for fiscal stimulus, trade, and tax cuts for the next 4 years, the conference concentrated on Russia, Mexico, and keeping business in the US. The initial speech was brief, with nods toward automakers, military, pharma, and jobs before quickly turning to Russia. Trump said that he “will be the greatest jobs producer God ever created", and called out specific companies on keeping production in the United States.
After a brief Q&A entirely focused on the President-elect’s involvement with Russia, Trump returned to the stage to cover Obamacare, his businesses, and border tax. He warned that “a major border tax” will be levied on businesses that move their plants “to Mexico or some other place”. From there the conversation turned to Mexico and ‘the wall’, sending the Mexican peso to a historic low of 22 against the dollar.
Financial markets reacted violently, with the Dow and S&P taking steep hits, although both quickly recovered. The DXY dollar index had surged almost a percent heading into the press conference, but quickly lost these gains and is settling near session lows.
The lack of detail, or even mention, of fiscal stimulus / tax cuts is problematic for the dollar. Investors have been optimistic for the USD’s prospects since the election, fixated on how these two measures will be positive for the economy. Among major currencies, JPY, GBP, NZD, EUR are all reaping the benefits from the dollar’s fall from grace. USD will be hard-pressed to find a bid in the near-term unless the new administration provides some affirmation for their post-election euphoria.
--Natalie Ciavarella is a Corporate Dealer at World First USA, Inc.
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