Don’t fade the Donald and other adventures in Trump tweet FX vol

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“The impact of Trump’s tweets on the FX market has been low in aggregate.” Sad.

But there is some action, says Deutsche’s Oliver Harvey, particularly where North Korea is concerned:

The average hourly range in USD/JPY, the cross that should be most sensitive to sudden changes in US fiscal, geopolitical or trade policy, is ten pips. Of the 70 relevant tweets on the economy, foreign affairs and trade we filtered from Trump’s Twitter feed since the election, a third have seen greater than 10 pip moves in the following hour. But only seven have seen a greater than 25 pip move in USD/JPY (figure 1). And some of these larger moves also capture other factors. The rally in USD/JPY after the strong February payrolls numbers, for example, coincided with a Trump tweet on the report. The market also appears to be paying less attention. As figure two shows, some of the largest 1hr, 4hr and 12hr moves following a relevant Trump tweet were shortly after the election and inauguration. The president still has the capacity to move markets, however. Hawkish comments on North Korea during March and April in particular captured attention.

The lesson here, for those who want to trade Trump Tweets in the Forex, appears to be that you shouldn’t fade the Donald:

Related links:
Trump says he ‘would be honoured’ to meet N Korea’s Kim Jong Un – FT
Stop worrying about Trump’s tweets – FT Alphaville

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About David Keohane