Stocks have hardly reacted to tumult in the White House — but the dollar has. That’s according to a Societe Generale researcher, Kit Juckes, in a Tuesday note, following a report from The Washington Post that President Donald Trump had disclosed classified information to a Russian official.
Top Trump Administration officials have denied the report. National Security Adviser H.R. McMaster called the article “false,” but failed to did not deny specific details of the report. Trump, meanwhile, defended his “right” to reveal facts to Russia about terrorism and airline safety.
Stock markets that are typically reactive in the face of uncertainty, stayed calm. The Dow, S&P 500, and Nasdaq were all largely flat in trading Tuesday. That’s because while the excitement about Trump’s election win has continued to boost stock markets, the uncertainty from the news of the leaks to Russia has helped pressure the dollar downward — so much so that the currency has lost all of its post-election gains. While a single dollar could be bought for 0.907 euros on Election Day, today it can be bought with 0.902 of a euro.
“The furor after news reports that the President shared highly-classified security information with the Russian foreign minister has prevented bond yields from rising in response to the equity market mood, and allowed EUR/USD to nudge above 1.10 again,” Juckes wrote. That’s because the Post’s report feeds “into the narrative of how maverick Trump runs his presidency, something that does not instill too much confidence,” according to Hantec Markets blog.
Still, the weaker dollar is likely being more heavily affected by disappointing economic data, with the New York Fed manufacturing data falling into negative territory for the first time since Trump’s election.
While a lower dollar can be a sign of a weaker outlook for the U.S. economy, Trump likely isn’t worried. He has called the U.S. dollar overvalued on several occasions, sending the currency down slightly each time.