Trump, the Healthcare Bill and the Dollar in Focus

The Dollar managed to close out the day in positive territory on Thursday, the delay in the healthcare repeal vote having been a major consideration for the markets, with the U.S President failing to get the necessary support from House Republicans, the conservatives continuing to oppose the Bill through the day.

The failure in getting the necessary support left the administration with little choice by but announce a take it or leave it vote later today, with the survival of Obamacare a possibility, something that Trump will certainly look to avoid, repealing Obamacare a cornerstone of the Republican’s campaign and that’s before considering the fact that Obama’s name would survive, rubbing salt into the wound.

The take it, or leave it strategy is certainly a risky one, more of a gamble than a strategy, suggesting that the division in the ranks is one of significance. The bigger concern is the fact that the markets are beginning to realize that Trump’s ducks are not aligned and that other campaign pledges that led to the Trump rally could also fail similar resistance. If a repeal of Obamacare fails, how can a $1tn fiscal stimulus package and tax reforms survive, the Republicans having policed the U.S debt ceiling through Obama’s presidency, the purse strings unlikely to be loosened with ease. The realization that the Bill will not lead to the savings that had been originally expected strengthening the grip on the purse strings.

Through the Asian session, there was a degree of optimism, with the Dollar Spot Index hitting an intraday high of 100.00, leaving the Dollar particularly exposed going into the European session, a ‘No’ vote expected to whipsaw the Dollar, while a ‘Yes’ vote will provide some support, with the healthcare bill assumed to have been the cause of the delay in rolling out a fiscal stimulus package and tax reforms.

While today’s vote will be high on the list of things for the markets to look out for, economic data out of the U.S will also be of influence with March’s prelim private sector PMI and February durable goods orders scheduled for release.

There are two realistic catalysts for a return to form for the Dollar, the whiff of a fiscal stimulus package or an increase probability of a 4^th rate hike for the year. Strong economic data this afternoon will provide the hawks with more ammunition, particularly if private sector PMI data reveals a pickup in output prices.

Across the pond, there’s nothing major for the markets to focus on, with macroeconomic data limited to February mortgage approvals, which will likely leave the pound in recovery mode from intraday lows, following the Thursday’s gain off the back of the bounce in retail sales in February. The BoE will need to assess whether the upside in February retail sales was a one off or an improving trend following recent weakness, the latest stats adding to an already confused outlook on BoE monetary policy.

The pound was on the back foot against the Dollar through the Asian session, falling to an intraday low of $1.2474 against, with the Eurozone economic calendar the busiest for the day ahead.

We will be looking for continued momentum in the Eurozone economy at the end of the 1^st quarter, with prelim manufacturing and service sector PMI figures scheduled for release through the morning, the markets likely to pay particular attention to new orders and inflation data, assuming that the headline figures are in line with or better than forecast. Increased inflationary pressures will certainly be a positive for the EUR, though the private sector will need to continue performing to support the ECB’s more hawkish outlook on the Eurozone economy, anything less expected to ease pressure on the ECB to make a move any time soon.

Private sector PMI figures out of France was certainly positive supporting the EUR, composite output rising to a 70-month high, with selling prices rising for the first time since April 2012 and new orders rising at the quickest pace since May 2011. Germany’s composite PMI also hit a 70-month high in March, according to prelim figures, driven by a manufacturing PMI 71-month high, with new orders rising at the quickest pace since Apr-11 and output prices accelerating at the fastest rate since Jun-11.

Outside of the macroeconomic data, the markets will need to keep a close eye on the French election polls, the number of undecided voters leaving a high degree of uncertainty over the outcome, with the London attack capable of swaying the undecided in favour of Le Pen’s policies.

At the time of the report, the Dollar Spot Index is up 0.06% at 99.822, easing from the intraday low of 100.00, the markets likely to be tread more carefully through the European and U.S session ahead of the healthcare vote, a negative for the Dollar ahead of the vote. At the time of the report, cable is up 0.09% at 1.25053, with the EUR up 0.19% at $1.08038, further gains expected for the EUR on release of the Eurozone composite PMI shortly.