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Some Thoughts about the Recent Price Action

Thursday, March 23, 2017 9:34
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(Before It's News) / by Marc Chandler / March 23, 2017

B4INREMOTE-aHR0cHM6Ly80LmJwLmJsb2dzcG90LmNvbS8tVG9jRHRGRmNUVnMvV05NQkFrc3RGSUkvQUFBQUFBQUFYam8vQXoxMXdyMlFxcVF2alVaUUpuY3VxcmhKQ0dQd3FVTWhBQ0xjQi9zNDAwL2xpZmUlMkJpbiUyQmluJTJCYSUyQmxpZ2h0JTJCYnVsYi5qcGc=(greetings from Tokyo.  Speaking at the CFA Society of Japan tonight)

The gains the US dollar scored last month have been largely unwound against the major currencies.  The dollar’s losses against the yen are a bit greater, and it returned to levels not seen late last November.
The down draft in the dollar appears part of a larger development in the capital markets that has also seen the US 10-year yield slide 25 bp in less than two weeks.   The two-year yield is off 17 bp.  The yield of 1.25% is 25 bp on top of the upper end of the Fed funds target range.
A few forces are at work.  First, is the reaction to the less aggressive stance at recent FOMC meeting.  Second, the Dutch election outcome and poll still pointing to a defeat of Le Pen in the second round of the French presidential election has seen some unwind of safe haven demand.  Third, oil prices have fallen.  Consider that as recently as March 7, light sweet crude was near $54 a barrel. On March 22, it reached almost $47, the lowest level since the end of November.  Fourth, President’s Trump draft budget for the remainder of the fiscal year and the drawn out process over his temporary travel ban and the replacement of the Affordable Care Act (Obamacare) warn that tax reform and infrastructure efforts will also be delayed.
There is much focus on the scheduled Thursday vote in the House of Representatives on the replacement for the Affordable Care Act.  We suspect that if it does not appear to have the votes, the vote will be delayed.  In some ways, there is much riding on it.  A defeat would be seen as jeopardizing President Trump’s agenda.   It would be a defeat for Speaker Ryan by the same forces that brought down his predecessor (the Freedom Caucus).


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