Feb. 4, 2017 (Tempus Inc.) – The U.S. Dollar is trending in a negative direction following the U.S. Non-farm Payrolls report and stellar data out of the Euro-zone and growing concerns over the unpredictability of President Trump’s administration. The U.S. economy added 227k jobs in January, up from 156k in December, but the drop in wage growth means less inflation and reduced odds of more aggressive rate hikes by the Fed.
Markets are also worried that President Trump’s tough and confusing stances on immigration as well as travel could negatively impact business activity across the globe. More concerning was yesterday’s firing of Sally Yates who as Attorney General stood against the controversial measures which deemed her as too soft on immigration. The Bloomberg Dollar Spot Index is down by 1.9% since January 20th.
The Dow Jones, S&P, and NASDAQ indexes have tumbled after reaching record highs. With trade agreements also on the chopping block, there is little in terms of stability at the moment.
The Japanese Yen is up this morning after the Bank of Japan’s policy meeting in which the outlook for economic growth was upgraded. No changes were made, but the tone was positive and the commitment to quantitative easing will be there to keep credit flowing.
BOJ Governor Haruhiko Kuroda did not criticize Trump’s statements regarding the perceived unfairness of trade agreements with Japan and others, but did point out that protectionism only serves as an obstacle to progress in an already globalized world.
Kuroda also explained that the BOJ does not have an exchange-rate target in mind and, once again, BOJ meetings are leading to Yen appreciation. The currency of the rising sun is up 4.0% since its weakest level of the year reached during the first week of January.
The Euro is up as a result of better-than-expected inflation data and likelihood of reassessment of loose monetary policy by the European Central Bank. Inflation for the Euro-zone revealed a 1.8% annual increment for the first month of the year, the best pace of growth in four years. A lot of it is owed to higher costs of energy, but puts the level near the ECB’s 2.0% target for price-growth.
Additionally, a trade advisor for the White House described the Euro as “grossly weak,” which in turn has benefitted Germany greatly, he said. These types of statements not only move markets, but are preambles to more incendiary statements that could signal a trade/currency war, which no one would want to be involved in. Euro is up 3.3% thus far in 2017.