US: Trading Trump tweets – Deutsche Bank

In view of Oliver Harvey, Macro Strategist at Deutsche Bank, President Trump’s Twitter is now a must-have tool for investors and with expectations about US fiscal and trade policy still among the key drivers of markets, how much attention should we be paying to the president’s tweets?  

Key Quotes

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

“On the seven occasions when a Trump tweet has seen a more than 25 pip move in USD/JPY over the next hour, it has also paid to follow rather than fade. Of those tweets, all have seen moves extend over a four hour period and in none have moves been reversed over a 12 hour period.”

“The bottom line is that while Trump tweets should continue to be highly relevant for the FX market, there seems little prospect of building a systematic strategy around them, except for the observation that sizeable moves seem worth following.”