USD Soft Ahead of Key Trump Speech
Last week saw the US Dollar coming under selling pressure on the back of comments by Treasury Secretary Mnuchin who highlighted his willingness to pass tax reforms ahead of the August recess, though did note that he recognised the risk of delay. Mnuchin also played down the potential impact of Trump’s policies on 2017 growth.
Trump’s speech before Congress today will be closely watched by market participants though it isn’t clear just how much detail on his key policy agenda will be shared during the speech. Last week, Trump noted that the details of the tax reform would only be made public after the health care plans are released in mid-to-early March.  Furthermore, some key policy makers such as Commerce Secretary Wilbur Ross, have not been confirmed yet, which is likely to have a delaying effect on policy action planning.
Trump Gives Clues As To Speech Content
While the exact content of the speech is not known, Trump and others in the administration have given some hints as to what will be contained in the speech which is expected to include a laying out of Trump’s plans to replace the Affordable Care Act. The Trump administration have also indicated that the President will propose a significant increase in defense spending for the fiscal year starting in October. Officials also noted that this increase will be offset by cuts elsewhere in the Federal budget. Disappointingly, it seems that at this stage the speech will not include any details on the administration’s economic policy agenda as these specific policy proposals are still being developed.
Fed Speakers on Watch This Week
There are factors this week which could potentially lend support to the US Dollar. Fed Chair Yellen speaks on Friday and will deliver the last speech by an FOMC member before the blackout period begins ahead of the March FOMC. While Yellen is likely to highlight the risks of waiting too long before raising, current market pricing isn’t expecting a March hike, so it will be interesting to see how this pricing will change in response to the speech. Vice Fed chair Fischer will also speak this week, discussing the framework for monetary policy, though is likely to focus on the communication of policy instead of the outlook for its direction in the short term.
