Summary:

• Gary Cohn, Donald Trump’s top economic advisor, announces his resignation after a fiasco in a trade battle with President 
• Australian GDP comes in slightly below forecasts, AUD remains quite muted though
• API reports a healthy stocks increase sending crude prices lower ahead of the DoE release

The US dollar slid, Treasuries gained a foothold while the Canadian dollar extended its decline when Gary Cohn, Trump’s top economic advisor, announced yesterday that he would step down. The prime reason is obviously a dispute with Donald Trump with regard to tariffs on steel and aluminium. Moreover, it should not be so surprising as we take into account last week’s remarks expressed by Cohn when he had warned that he might resign if Trump followed through with his contentious idea. US President Donald Trump said in a statement to the New York Times that “he is a rare talent, and I thank him for his dedicated service to the American people”. Gary Cohn acted as a counterbalance for Trump’s madness, however, his resignation actually means that Trump is not going to move away from tariffs which in turn could be used as a bargaining chip in NAFTA talks.

The Loonie suffers from the Cohn’s resignation as the move could make tariffs exemptions harder to achieve. The pair has just approached a crucial resistance area where some seller could be jumping in. Bear in mind that the CAD could wobble during the day due to the BoC’s decision. Source: xStation5

On that account the Canadian dollar is the weakest currency in the G10 basket losing over 0.4% in early trading. One cannot miss the Mexican peso being traded 0.65% lower against the greenback as the two neighbouring countries have become the most exposed to Trump’s tariffs after the Cohn’s decision.

Household consumption added a decent part to growth in the fourth quarter. In this respect it needs to remember about concerns regarding households expressed by the Reserve Bank of Australia yesterday. Source: xStation5

Moving on, let’s focus on the Australian GDP release which came in subtly below anticipations, however, the AUD barely responded. The report showed that the Australian economy expanded 0.4% qoq and 2.4% yoy missing the consensuses set at 0.5% and 2.5% respectively. Is it a real disappointment? To be honest, the reading turned out to be quite sturdy given what we had gotten earlier this week (weaker inventories as well as next exports). The details illustrate that public and private consumption (among others) added to growth while net exports were the largest drag since the first quarter of 2012. Overall, the data was quite strong albeit the underlying GDP growth seems to be consolidating, and along with a weak position of households (feeble wage growth in conjunction with a high leverage) could be an obstacle to see the quicker pace going forward.

If the short-lived pullback in the US dollar has been finally ended, the Aussie could creep up in the nearest future. The AUDUSD rebounded from its relevant support zone following increased risk appetite and therefore one may count on a bounce toward 0.8000. Source: xStation5

While the US stocks ended the day with decent gains (the Cohn’s resignation was released after the close) oil prices retreated substantially. At the time of writing WTI and Brent prices are going down over 0.8% which could be ascribed to the yesterday’s API release (spoilt moods in the aftermath of the Cohn’s decision played their role as well) showing US stocks increased more than double. The API said inventories picked up 5.66 million barrels while just a 2.7 million barrels build had been expected. On the flip side, gasoline stockpiled dwindled over 4.5 million barrels suggesting, if confirmed today, possible increased demand from US refineries over the course of the next weeks. Keep in mind that seasonality will be acting to the detriment of crude prices in the next several weeks but in light of strong US oil exports a seasonal rise of stocks could not be so heavy as it tended to be in the past.