Daily Market Color

U.S. Stocks, Treasurys Muted with Trump Conference on Horizon

Fed’s Lacker Set to Retire in October   Today Jeffrey Lacker, the Federal Reserve Bank of Richmond President, announced his plans to retire come October 1st of this year, three years ahead of the mandatory retirement age.  Tenured since 2004, Lacker was known for his hawkish outlook, often standing in opposition to the accommodative measures taken by the Fed in the period following the financial crisis, most notably the Fed purchases of mortgage-back backed securities in 2009.  Further exemplifying his views on monetary policy, during the period when he was a voting member on the FOMC, Lacker dissented at every FOMC meeting in 2012.  Lacker stands as the second Fed policymaker to step down this year, with Atlanta Fed President Dennis Lockhart set to leave in February.       
British Pound, Turkish Lira Resume Decline        
With Theresa May’s weekend speech hinting towards a “hard Brexit”, the value of the British pound declined again on Tuesday, falling as low as $1.2115 per GBP.  The level represents the lowest since October, which was the lowest level for the currency in over 30 years. Several economists predict that the currency may approach parity and fall to all-time lows come the official triggering of Article 50.  Benefitting from the depreciation, British stocks have risen for the 11th trading session in a row, a feat that has only happened three times since 1984.  The FTSE 100 has now closed at a new record high on every business day since Christmas, with international export stocks within the index thriving as their products become more affordable to other countries.

The Turkish lira has also been on a steady pace of setting new records in 2017.  In five of the first seven trading sessions of the new year the lira has reached a new record low, sliding a total of six percent against the dollar during that span.  The Turkish currency has now averaged a 15% annual depreciation over the past three years, with investors dissatisfied over the Turkish central bank’s decision to not raise benchmark interest rates.  After today’s session, the lira’s is sitting at a fresh low of 3.73 per dollar.

With Donald Trump set for his first news conference tomorrow, all three major US stock indices traded within a tight range again today, as the DJIA shed 0.1%, Nasdaq gained 0.35%, and S&P 500 remained unchanged.  US Treasurys similarly traded within a narrow range, with yields/swap rates moving 1-2 bps higher across the curve.  Prices of crude oil resumed their slide, declining another 2.3% on supply concerns.  WTI crude currently trades at $50.75/barrel while Brent crude sits near $53.65/barrel.    

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