Rising geopolitical risk helps ease US political risk and supports USD - AmpGFX

Greg Gibbs, Director, Amplifying Global FX Capital noted in his latest research post that the US dollar may find support as confidence in the Trump administration increases amid rising geopolitical risks.

Key Quotes:

“Geopolitical risk appears elevated after recent events in Syria, Tillerson en route to Russia, US warships en route to the Korean Peninsula, and reports of Chinese troops moving towards the North Korean border.” 

“These developments are providing support for JPY and gold, and keeping global asset markets on edge, trading in choppy ranges. “

“However, rising geopolitical risk is helping revive confidence in the Trump administration and reduce political risk in the USA.” 

“The improvement in Trump administration performance may prove more durable and lift yields and help support the USD as geopolitical risk fades, reversing recent gains in JPY and gold.” 

“The USA labor data had no smoking gun on inflation, but revealed further tightening in the labor market and will keep the Fed on a path to gradually tighten rates and begin to dis-invest in Treasuries and Agency MBS later this year.  Recent flattening in the US yield curve may also reverse if geopolitical risk recedes.” 

“Nerves over the French election are rising as the race for the first round tightens.  EUR is languishing near recent lows.  If Macron makes it to the second round on 23 April and Le Pen achieves little more than a quarter of the vote, EUR may start to recover.  The probability of a Macron victory should rise in a head-to-head run-off with Le Pen.”