Comments made by US President Donald Trump on Twitter may drive movements in US stocks, but they have generally minimal impact in the foreign exchange market, Deutsche Bank said in its latest research note. The bank's macro strategist, Oliver Harvey, said however that the few sharp moves that can result from Trump's tweets are worth following as they tend to extend for several hours.
"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 sizable moves seem worth following," said Harvey. The average hourly change in dollar/yen, the currency pair most sensitive to changes in US fiscal, geopolitical, or trade policy, is just 10 pips, which is modest by currency standards.
A pip is the smallest amount by which a currency pair can change. A currency pair can move 10 pips on a regular trading day without news driving it. The Deutsche analysts said of Trump's 70 relevant tweets on the economy, foreign affairs and trade since the November election only seven have seen a greater than 25-pip move in dollar/yen, and some of these larger moves can also be attributed to other factors.
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