Tumblin’ Tuesday – Weak Dollar Not Enough to Save the Market

Our man, Mnuchin, is on the case!  

In an interview with The Wall Street Journal last week, U.S. President Donald Trump said a “too strong” dollar made it difficult to compete with other countries in trade, pushing the currency lower.  Yesterday, Treasury Secretary Steve Mnuchin told the Financial Times he agreed with Trump and that the Dollar's strength was hurting exports, sparking concerns are that the United States could take a tough trade stance against Japan, which has been wary of Trump's complaints that it and other countries have artificially weakened their currencies.

In even worse news for the markets, Mnuchin said it was now unlikely that tax reforms will come in time to have an impact on 2017:  “It started as [an] aggressive timeline,” the former Goldman Sachs banker said in an interview with the Financial Times. “It is fair to say it is probably delayed a bit because of the healthcare.”    

Image result for trump dollarMr Mnuchin rebuffed suggestions that Washington may be seeking to depreciate the currency via verbal interventions following remarks from Mr Trump last week. “As the world’s currency, the primary reserve currency, I think that over long periods of time the strength of the dollar is a good thing,” said Mr Mnuchin. “It’s a function of the confidence and the strength of the US economy.”

In other words, as I said on Thursday, it's yet another issue on which the Administration flips or flops on – depending on the day.  If you don't think this sort of thing affects the markets – just ask Mnuchin's bosses at Goldman Sachs, who just had disappointing earnings (told you so!), who said the atmosphere of policy uncertainty caused the 0.16 (3%) earnings miss and $500M (5%) revenues miss.  

Goldman Sachs (GS) is a Dow component and is down $6.50 pre-market and that should cost the Dow about 50 points at the open.  This will be good for the SKF trade we talked about yesterday.  Speaking of things we talked about:  In last week's Live Trading Webinar (Wed 12th, 1pm), we called for a short on oil right at the open (2:03) and we expected a drop back to $52.50 for a $1,000 per…
continue reading