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If the market wasn't already scratching it's head over what is President Trump's core policy beliefs, it should start to at this stage because there hasn't been a clear line of thought or direction and he hasn't demonstrated the ability at this stage to push through any major policy.

  • From his administration's failure to corral the Republican party into a clear healthcare plan stemming from his desire to notch any W on his ledger, him taking credit for a strong labour market that had pretty much nothing to do with him, his endless tweets, his failure to fill up cabinet positions, the more damning indictment would be his flip-flopping on some of his campaign pledges.

More evidence came o/n in his interview with the WSJ.

  • Recall he had pledged to brand China a ccy manipulator straight after he took office. Well, he has now walked back on this, saying that �they're not currency manipulators".
  • Note that in the immediate aftermath of him taking office, he had questioned the �One China" stance before a quick-fire walk-back.
  • Trump has also reversed his view of NATO in the face of the ongoing geopolitical backdrop, now saying that it's �no longer obsolete".
  • Recall too that he held a bias towards replacing Fed Chair Yellen previously, but he has apparently reversed course on this as well saying he's open to the possibility of her staying on as he favours a �low interest rate policy".

About the only thing that he has stayed steadfast in is his immigration stance and his jawboning of the USD, with his argument for the latter based on the fact that it reduces the competitiveness of US companies.

Well, he repeated USD jawboning o/n and this along with his preference for low interest rates saw the USD slump and USTs rally hard yet again.

We have long stressed our doubts over Trump policy and in particular how the market was pricing to perfection what we saw as clear unknowns, and we continue to expect more unwinding of parts of the Trump trade ahead.

Specifically lower UST yields and USD.

While it will also weigh slightly on market sentiment alongside the current geopolitical jitters, once the latter risk abates, we would expect a continuation of the carry trade and rotation into EM Asian assets. JH

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