by Bill O’Grady, Kaisa Stucke, and Thomas Wash

[Posted: 9:30 AM EDT] After a week of tumult, things appear rather quiet this morning.  Equities have a bullish tone after a drop midweek.  Oil prices are up as OPEC officials meet to prepare for next week’s policy setting meeting.  There are hopes that the broader cartel can follow Saudi Arabian and Russian lead and extend production cuts into Q1 2018.  The dollar is continuing to fall this morning and this factor may be the most bullish fundamental for oil prices.

The president is about to embark on his first foreign policy trip.  On its face, this exercise should be a cakewalk.  He is meeting with allies who should be mostly supportive.  His first stop is in Riyadh for two days (Saturday and Sunday), where he is meeting with King Salman and giving a speech on Islam.  This is a risk area for the president.  In theory, he should craft a non-descript talk about Islam being one of the world’s great religions and focus on the good works it performs.  However, we note that this speech is being drafted by Stephen Miller[1] who also crafted the first travel ban.  Any talk about religion requires nuance.  Making broad statements about any religion in a policy speech is ripe for creating tensions.  Thus, the potential for a stumble here is high.  On the other hand, the Saudis didn’t care for President Obama and are looking forward to a “reset” with President Trump.  Accordingly, expect the Saudis to do everything possible to make this leg of the trip a rousing success.

On Monday and Tuesday, the president visits Israel.  This should be an easy visit.  However, there are a couple of issues that could present a problem.  First, we will be watching to see if PM Netanyahu presses Trump on moving the U.S. embassy to Jerusalem.  Second, will the president’s sharing of intelligence with the Russians that apparently could have revealed sources and methods of Israel’s intelligence on ISIS become an issue?  We doubt either will, but it’s possible.  In addition, on Tuesday, the president meets with Palestinian President Abbas; the hope here is that the visit will restart peace talks.  Next, on Wednesday, the president meets Pope Francis.  We expect both men to be gracious and avoid difficult conversations, at least in public.  The pope finds many of Trump’s policies offensive and private discussion of these disagreements is probably unavoidable.  Nevertheless, as long as Trump isn’t publically dressed down, this visit should go well.

The president leaves Rome and spends the rest of Wednesday and Thursday in Brussels at the NATO meetings.  Look for Trump to praise the alliance and call for more defense spending.  We are hearing rumors the Merkel government is making “inquiries” about the F-35.  If so, this may be a precursor to a sale and allow the president to get a “win.”  Finally, on Friday and Saturday, the president flies to Taormina, Italy for the G-7 summit.  There are potential risks here.  He has differences with Chancellor Merkel and clearly supported Le Pen in the French elections.  And, the president reportedly doesn’t like to travel and could be fatigued by the end of the trip.  Thus, there could be some awkward moments.

Will anything here be market moving?  Probably not.  The market most sensitive to gaffes is probably forex.  The dollar is already rolling over and if the president stumbles it will likely add further bearish sentiment to the greenback.

There are two other news items we are watching.  First, Julian Assange of Wikileaks may be a free man soon; Swedish prosecutors are reportedly ending the sexual assault investigation without charges.  It will be interesting to see where he goes once released.  He has an outstanding warrant in the U.K. for not appearing in court and the U.S. would like to prosecute him on his role in several incidences of gaining U.S. classified information.  If he ends up in Moscow, it will severely undermine his argument that he is just trying to make the world aware of what governments are doing.  Second, the U.S. executed airstrikes on Syrian military assets operating near the Jordanian border where U.S. forces are training opposition fighters.  We will be watching to see if anything escalates.

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[1] Not this Steve Miller: http://www.stevemillerband.com/