This will be brief, it being a public holiday here in Australia (happy birthday Liz!) – and on the subject of the aforementioned Queen Elizabeth II, my congratulations to former RBC and State Street FX stalwart as well as former ACI president Marshall Bailey for his OBE (to financial services and charity).
That’s as nice as it gets today, because I need to talk about that most polemic of men, the US president. Absolutely anything involving Donald Trump elicits heated opinion, so I was unsurprised by the outrage in some quarters when he rather unsubtly gave away last week’s US employment report about an hour early thanks to his inability to give his thumbs a rest on Twitter for more than an hour.
At face value, leaking data like that – it should be noted that he did not give specific numbers but let’s face it, he wasn’t to say he was looking forward to the data if it was a rubbish number would he? – sounds like a federal offence, as was suggested in some quarters, but was it?
My kneejerk reaction was “he’s gone too far this time”, but then on consideration it struck me that he did at least provide the leading indicator on a public forum where everyone could see it at the same moment. It wasn’t like a select few had been tipped in (although I am sure someone wants that investigated), this was broadcast to anyone who follows him on Twitter, which appears to be 99% of the people in financial markets!
In many ways this is no different to the news being published by Reuters, everyone sees it at the same time, as long as they have the news service; or it being released onto a government department’s website.
So the signal that the numbers were going to be good and the method of release, while unconventional, did not disadvantage a large amount of people specifically, but that doesn’t make it OK.
Prudent risk management is essential to any investment group of financial trading house and a big part of that involves knowing where the risk points are – and in financial markets non-farm payrolls are one of the bigger pivots. So to have the US president casually and without care tweet out the data early greatly increases the risk of a loss to some market participants.
It would be very helpful if someone could explain to the president (I doubt he will listen of course, but we have to try) that by triggering price action early in markets he is surely running the risk of litigation (I suppose he will just pardon himself before the trial to save money!) After all, if I were an asset manager very steadily lightening a position ahead of a big data release and it is sprung early by an irresponsible tweet leading to a significant loss that I would have avoided by being square at the release, I think I might be considering my legal options.
It is one thing bombasting at large about geo-politics but quite another to interfere with the routine in financial markets where real people’s money is at stake and as such, it is to be hoped that his advisors finally manage to explain to the US president that there is a reasonable limit to what he can and cannot do, and playing with the markets is way beyond that.