Market Round Up: US GDP gee-up & In the Greenback we trust

by 27 Jul, 2018

1. U.S GDP gee-up

The U.S. reports its initial gross domestic product (GDP) figures later today, with estimates suggesting expansion comparable to 2014.
With GDP growth anticipated to top 4% quarter on quarter, it will affirm the Fed’s current policy path to gradual interest rate rises. However, many analysts believe this positive signal is a one-time effort, with growth numbers expected to moderate in subsequent quarters.
Meanwhile, markets will be hoping for a continuation of robust corporate results during this earnings season in order to bring further reprieve to stocks troubled by trade war fears.


2. In the Greenback we trust, but for how long?

For decades the good old greenback has been the linchpin of the post-Bretton Woods monetary era. It has mattered to more than Americans that the world’s reserve currency be stable. And it has always been assumed that it was in Americans’ own interest to keep it so.

However, Trump’s latest wheeze is to devalue the dollar and, by extension, global U.S. debt. Why? It seems Trump is peeved that everybody, but especially China, uses the dollar and U.S. Treasuries as safe havens. As a reserve-status, it means the U.S. current account is always in deficit. But by design, it also means the U.S. maintains its top-dog status. This means the dollar is never subject to the normal rules that beset other countries – such as a ratings downgrades due to its $20 trillion national debt.

So would Trump upset his country’s triple A rating? Let’s hope not as the world continues to trust in the greenback. After all, what would be the alternative? The Yuan, Yen or the Euro? Or even back to the old days of gold?

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