Analysts at ING points out that despite a healthy jump in April Industrial Production, lifting the Atlanta Fed’s GDPNow 2Q17 US growth estimate to 4.1%, US yields and the dollar are lower.
“The dollar move can partially be attributed to a re-rating of the under-valued currencies of major trading partners. But the move in US Treasury yields may relate to the domestic difficulties faced by Trump – most notably in his stand-off with the FBI. Following suggestions that the President may have interfered with an FBI investigation into former national security adviser, Michael Flynn, it now looks like various oversight committees will be demanding to see all communication between the FBI and the President, including Mr Comey’s notes and potentially tapes made by President Trump.”
“While the term ‘impeachment’ may appear more frequently in the press today, the process is initiated by a vote in the House, where Republicans hold a 45 seat majority. A House impeachment of President Trump would look unlikely. That said, this is proving a distraction from the President’s agenda, including what should be a more detailed budget released next week. For the time being, expect the dollar to stay on the backfoot, especially against the low-yielding, safe-haven JPY and EUR.”