US Dollar Holding on to Week's Gains

The US dollar is about 12 hours away from gaining against all the major currencies this week.   The main talking points today remain Trump-centric. 

Ahead of the meeting with Abe, Trump indicated that currency manipulation, which he has accused several countries, including Japan, is not on the top of the agenda.  This may have encouraged further yen weakness today.  

Trump also reportedly indicated to Chinese President Xi that the US will continue to abide by its previous commitment to a one-China policy.    These two developments reinforce a sense of  negotiating bluster style of the new Presidents.  The US president also had another legal setback as a US federal appeals court rules unanimously rejected reinstating ban on immigrants from 7 Muslim-majority countries.  Case on way to Supreme Court.

Meanwhile  Trump yesterday indicated that a "phenomenal" tax-related announcement would be made in the next several weeks.  During the campaign talked about 15% corp tax rate while GOP plan was for 20%.  The Government Accounting Office says US large corps paid an average 14% rate in 2008-2012.   Other studies say that overall US business pay 21.1% vs 21.7% OECD average.

China's trade surplus may be the largest macro report.  Caution is that Jan-Feb data distorted by Lunar New Year.  Still, the direction is favorable.  The surplus was $51.3 bln up for $40.7 and $48.5 bln. Exports rose 7.9% year-over-year after beings off 6.2% in Dec and is more than twice expected.  Imports rose 16.7%, this is good for countries that export into China, which is many countries and many even have surpluses with China (not US) and were up 3.1% in Dec.  Economists knew they would bounce back and expected 10% increase.

MSCI Asia Pacific has alternated between gains and losses this week and as it lost ground yesterday, it is only fitting that it was up today (+0.9%).  It was up 1.2% for the week and it is the third weekly gain.

The US dollar is mixed as European trading gets underway.   Of note the dollar is continuing to gain on the yen.  The yen is off 0.4%, which is nearly half the week's decline.  The Aussie is the strongest on the day, up about 0.2% to trim the week's loss to about 0.45%.  Sterling is the strongest of the majors this week and it is off about 0.1%.  

The front page story in the FT is about Greece.  Surge in yields as divisions within IMF played up. Will try to have a post on it later today, but key point here is Greece does not need the funds until July when it has big payment due.  Dutch parliament dissolves shortly for March election so not decision by Feb 20 and it means nothing probably until after the French elections.  Brinkmanship is still the most likely scenario.

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