020 7898 0500The dollar (USD) weakened slightly on Tuesday as investors awaited President Trump’s much anticipated speech to Congress, for indications of his economic plans. Investors have been wary that Mr Trump may disappoint those who expect greater detail, following a distinct lack of information around his polices thus far. The outcome of the speech is that they are probably not that much the wiser but he confirmed his intention to increase defence and infrastructure expenditure and reduce tax so that there is a level playing field for international trade.
Initially the dollar rallied to a 14 year high in the wake of Mr Trump’s election triumph. Boosted by hopes of large fiscal stimulus and reflationary plans. However, the reality has been somewhat different, due to a lack of clarity.
Investors have instead been focusing on the Federal Reserve’s rhetoric, as speculation of an interest rate hike in March intensifies. Only last week an interest rate increase in March was priced at 25%; fast-forward a matter of days and now the market is pricing in a 50% chance of a March hike.
Gross Domestic Product (GDP) figures for the fourth quarter of 2016 and 2016 annualised were both revised slightly lower today. Both came in at 2.1% last month, but have been revised to 2.0% and 1.9% respectively, which coincided with a drop in both core and personal consumption for the heavy consumer led economy.
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