Morning comment - 22/3/2017 UBS

• Investors are starting to appreciate that a lot has to happen to turn a Tweet into a law. Uncertainty over whether the US Congress will pass the Trumpcare healthcare reforms on schedule is raising questions about the viability and timing of other economically important policy proposals.
• The dollar is vulnerable to this political uncertainty because the dollar's value is entirely dependent on foreign investors' willingness to buy. Foreign investors (anywhere) are more inclined to overreact to political risk than are domestic investors. The euro's value depends on the actions of domestic investors.
• Mester of the US Federal Reserve was suggesting that quantitative policy could move from organic to passive tightening as early as this year (a move that would accelerate the decline in the Fed balance sheet to GDP ratio). Kaplan of the Fed was offering less urgency on tightening quantitative policy. Rosengren speaks today.
• The Euro area current account for January is due – the US current account deficit narrowed unexpectedly yesterday (although this was not due to the trade balance). Italy is suggesting that the forthcoming G7 summit should reiterate opposition to protectionism. The US is of course part of the G7 – for now.