(C) Chairman of the Joint Chiefs of Staff. Reproduced under Creative Commons licensing.
“The Trump firing of Tillerson is giving GBP a further boost on the back of a general US Dollar sell off” - Neil Jones, Mizuho Bank.
The US Dollar was put under pressure during noon trading in London Tuesday on news President Donald Trump was replacing Secretary of State Rex Tillerson, marking the second high level departure from the White House in March.
The news injected an element of political risk premium into the Dollar which allowed the British Pound to climb to its highest level in two weeks. “The Trump firing of Tillerson is giving GBP a further boost on the back of a general US Dollar sell off,” says Neil Jones, Head of Corporates & FIG at Mizuho Bank.
Mike Pompeo, Director of the CIA, will become our new Secretary of State. He will do a fantastic job! Thank you to Rex Tillerson for his service! Gina Haspel will become the new Director of the CIA, and the first woman so chosen. Congratulations to all!— Donald J. Trump (@realDonaldTrump) 13 March 2018
Tillerson, a former CEO of Exxon Mobil, signed on to lead the Trump administration's State Department soon after the 2016 election. He will be replaced by Central Intelligence Agency head Mike Pompeo.
It remains unclear why the President chose to replace the Secretary of State although an official at the State Department has said Tillerson intended to continue his service and that the news came as a surprise.
From a currency perspective it is clear the implications for the Dollar are negative.
"Rex Tillerson leaving as US Secretary of State confirms that Trump's protectionist 'America First' agenda is no political show - risks that we'll get more trade & defence policies soon, while Cabinet turnover vindicates the US Dollar commanding a 'White House chaos premium'" says Viraj Patel an analyst with ING Bank.
The US Dollar index - a measure of broader Dollar performance against a basket of currencies - swiftly converted what was a fractional gain for the session, into a loss of 0.29%, in response to the announcement.
The Pound-to-Dollar rate was quoted 0.51% higher at 1.3985 around the London close Tuesday, marking its highest level in the new month, after reversing an earlier loss.
The Euro-to-Dollar rate was 0.45% higher at 1.2393.
“Many analysts have suggested in the last week that political risks have largely subsided in the US as Trump has backed away from sweeping steel and aluminium tariffs, but today’s event goes to show how quickly things can change in Washington. US dollar weakness continues to endure and even the prospect of 3 rate hikes this year from the Federal Reserve won’t change this,” says Hamish Muress, currency analyst at foreign exchange brokerage OFX.
According to officials in the State Department Tillerson, "had every intention of remaining because of the tangible progress made on critical national security issues. He established and enjoyed relationships with his counterparts."
"The Secretary did not speak to the President this morning and is unaware of the reason, but he is grateful for the opportunity to serve, and still believes strongly that public service is a noble calling and not to be regretted," said Steve Goldstein, Under Secretary for Public Diplomacy & Public Affairs at the State Department, in a statement.
There was speculation in November last year that Tillerson had considered resigning from the State Department, as well as allegations he had described the President as "moron" in a private meeting. Tillerson never denied making that comment.
The New York Times reported in the same month that the White House was drawing up a plan to replace Rex Tillerson with CIA chief Pompeo. These claims were rejected by the White House at the time.
Tillerson's departure comes just one week after National Economic Council director Gary Cohn left the White House of his own accord.
It was widely reported that Cohn resigned in response to President Trump’s decision to impose new tariffs on aluminium and steel imports into the United States, which drew condemntation and threats of retaliation at the international level.
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