Week Ahead Figure 1

Markets reassessed the ability for the administration to push through pro-growth reforms pertaining to tax cuts, increased infrastructure spending and deregulation. In Brazil, renewed corruption allegations compounded the effects of the growing risk off sentiment. The rand weakened by 1.7% by Thursday versus the start of the week, but pared losses to a 0.7% depreciation into Friday. The broader economic backdrop still remains favourable for emerging market currencies with global growth set to lift, higher commodity prices and a gradual pace of policy normalisation by the Fed. The rand is expected to trade in a range of R13.80/USD – R12.80/USD, R15.30/EUR - R14.30/EUR and R17.80/GBP - R16.80/GBP. 

(AK) Over the past week market sentiment has been engulfed by the storm in Washington following claims that President Trump sought to halt a Federal Investigation. The news triggered the biggest one day loss in US stock indices in 8 months. The claims relate to suggestions that Trump asked sacked FBI Director Comey to ‘drop’ investigations into former National Security Adviser Michael Flynn; these had formed part of the investigation into any Russian efforts to influence the 2016 election result. Amidst massive global interest, the US Justice Department named former FBI Director Robert Mueller as special counsel to the Russia election meddling investigation whilst two Congressional Committees (the House Oversight and Senate Intelligence Committee) are also looking into election meddling. Both have requested further documentation.

The Senate Intelligence Committee has requested copies of the recordings, notes and summaries of relevant discussions by 24 May. One further angle to watch closely will be how much political capital this continues to eat up, as market watchers continue to size up what this means for the implementation of Trump policy initiatives including tax reform; these are likely to fall into the background.

President Trump will attend the G7 Leaders Summit in Italy on Friday (26th). This will be President Trump’s first, though he has met a number of the attendees one-to-one with mixed results. It’s likely he will reiterate Mnuchin’s stance: reserving the right “to be protectionist if we don’t believe trade is free and fair.” President Trump’s also attending the ‘obsolete’/’not-obsolete’ NATO meeting (25th). His behaviour will no doubt be closely scrutinized given current controversy over his friendliness with Russia.

Week Ahead Figure 2