Greenback Tweets Its Way Lower
July 31, 2017
Dennis Gartman is editor and publisher of The Gartman Letter, and strategic advisor of the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN). He regularly contributes to AlphaBaskets and lends his institutional insight to educate advisors and investors about commodities and the forex markets, including about trading gold in different currency terms.
The dollar is weak relative to the Yen and to the EUR, and it is materially weaker relative to the Canadian dollar. The weakness relative to the former two currencies is, in our opinion, an expression of the growing dissatisfaction with the turmoil in the Trump Administration. We obviously hope that the removal of Mr. Priebus as the President’s Chief of Staff and the imposition of Gen. Kelly in his stead shall do much to assuage these growing concerns on the part of international sellers of the dollar. However, only time… and materially fewer “Tweets” by the President… shall tell.
We note here that President Trump and Japanese Prime Minister Abe spoke yesterday regarding what the jointed called the increased “grave and growing” threat that North Korea has become. The US and South Korea have made it very clear, via one example after another of air power flying over the Korean Peninsula, that the North Korean situation is a very real and concern. Mr. Abe… whose popularity in Japan has been falling rather sharply of late… was very public this weekend with admonitions against the regime in North Korea and has openly called upon the UN to put into effect broader and more severe sanctions against the regime in Pyongyang.
Regarding Canada and regarding less worrisome events, we note that our neighbor to the North on Friday reported that its GDP rose a very sharp 0.6% month-on month in May. This was materially better than Bay Street’s consensus forecast of +0.2% and the strength was broadly based, for the “good producing” sector of the economy rose 1.6% month-on-month while the oil and gas “extraction” segment grew 7.6%. The Bank of Canada thus has a green light, following this report, to tighten monetary policy even as the US holds policy steady for the next several months.