President Donald Trump has given the $5.1-trillion-day currency market a shot in the arm.

During his first 100 days in office, the U.S. leader’s pronouncements on trade, taxes and foreign policy have tended to generate a burst of activity in the world’s biggest financial market.

CLS Group Holdings AG, which settles more than $1 trillion of currency trades daily, crunched the numbers and found examples of at least five days in which the administration caused the volume of transactions to leap.

“Irrespective of how successful President Trump is perceived to have been so far, he and his administration dominated news headlines during the first 100 days in office,” CLS said in a report released this week. “The impact on the FX market was indeed significant.”

Market gyrations have been a boon for global investment banks including Morgan Stanley, Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc., which reported strong first-quarter revenue from trading bonds, currencies and commodities.

In one example of Trump’s impact on currency trading, average hourly volumes surged to $84 billion at 4 p.m. London time on Jan. 31 after Trump and an adviser criticized U.S. trading partners for having currencies that are too weak, CLS data show. That’s up from an average of below $50 billion for that period in 2016, as seen in the CLS graphic below:

Activity also surged as Trump promised a tax-reform plan in February, promoted his health-care bill in March and expressed concern about the dollar’s strength this month. The boost in short-term trading has coincided with a weaker greenback, which has almost wiped out its post-election gains.

The following are examples of trading flurries during Trump’s first 100 days based on average hourly volumes during London time, according to CLS:

$68 billion at 3 p.m. on Feb. 9: Trump promises “phenomenal” tax plan

$58 billion at 3 p.m. on March 21: Risk assets stumble on concern that the president’s health-care bill would fail to get through Congress

$32 billion at 2 a.m. on April 7: Trump orders strike on Syria

$41 billion at 8 p.m. on April 12: President expresses concern about dollar strength

“With Trump’s approach to governance via Twitter, it’s no wonder that volatility has increased, and volumes as a result,” said Bipan Rai, senior foreign-exchange and macro strategist at the Canadian Imperial Bank of Commerce in Toronto. “Developed markets are still adjusting to political risk being priced into currencies.”

Source:
courtesy of BLOOMBERG

by Lananh Nguyen

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