Say what you like about President Trump, but boring he is not. In dramatic scenes in Washington D.C. today, the President announced that he had “fired” his national security advisor John Bolton citing strong disagreements.
The obvious question is, why is this important to financial markets? Well, John Bolton was an uber-hawk who advocated hardline approaches to North Korea, Russia and Iran amongst others. The last is particularly significant, as his departure could potentially thaw relation with Iran. The oil markets certainly thought so, as Brent and WTI plunged at the prospects of Iranian crude officially hitting international markets sooner rather than later. President Trump says he has a new diplomatic bolt-on in mind for the post; a more level head could well help thaw some of the administration’s international disputes and be a rare ray of macroeconomic sunshine in a stormy year.
Mr Bolton’s The Apprentice-like departure, was the highlight of an otherwise uninspiring session for traders as markets await the ECB rate decision later today. The overnight trading session was notable mostly for the continued pullback in U.S. Treasuries and German Bunds, as yields on both continued to rise gently. With the expectation of the resumption of quantitative easing by the ECB tomorrow and a rate cut by the Federal Reserve next week, the risk environment has solidified and tempted investors out of hiding from the bonds markets and back into equities.
The pressure is probably heavier on the ECB to deliver tomorrow, then the Fed next week. A casual look at the European data this year will explain why. The ECB President Mario Draghi though has faced an internal battle with his Northern European hawks over further easing. Although we expect a modest rate cut tomorrow, the amount of QE the ECB may propose has the potential