Donald Trump reaches across the aisle at the State of the Union, but not for long


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There were nods to bipartisanship. And then there were partisan shots. Both came from Donald Trump.

Such were the contradictions of Tuesday's State of the Union address. A day-by-day contest is going on in Washington that will last until there is a clear winner, or more likely someone concedes the fight.

On one side is the president and his administration. On the other is an opposition that left the Capitol building last night much as they arrived – at odds with what Mr Trump stands for, let alone what his plans are.

But it had started better than that.

There was talk of unlimited potential and historic breakthroughs. The White House's agenda was not Mr Trump's agenda, he said, but the agenda of the American people.

The areas where there could be common ground between Republicans and Democrats were listed: infrastructure, healthcare. America should be aiming for a new standard of living, Mr Trump called for all members of Congress to work together.

And then, 15 minutes after he started, the atmosphere in the room changed in the space of one sentence as Mr Trump's customary hyperbole came to the fore.

“An economic miracle is taking place in the United States – and the only thing that can stop it are foolish wars, politics or ridiculous partisan investigations.”

Television cameras immediately panned to Adam Schiff, the Democratic congressman who as chair of the House Intelligence Committee has pledged to probe Mr Trump's finances and his alleged ties to Russia. But that was just the start. Immigration was the meat of the evening.

“Organised caravans are on the march to the United States,” the president said of migrants from Central America, drawing hisses from the audience.

Mr Trump's planned wall on the Mexico border took up almost one-third of the 85 minutes he was at the lectern. His assembled military chiefs sat stone-faced as the president said he had sent American troops to the southern border to avert a crisis that has caused US workers' wages to fall. Again, people shifted uncomfortably. They were sat together but the gaps between Republicans and Democrats were opening up.

And then came the kicker. The president said the wall would be a “smart, strategic steel see-through barrier in areas where there is the most urgent need” on the border. Such a security barrier would represent a departure but be better from the concrete wall he has long called for $5.7 billion from Congress to build. With a deadline of February 15 for Republicans and Democrats to come up with a new spending bill that will give Mr Trump the money – or cause another government shutdown, as he has threatened. We will know soon if his challenge was persuasive.

The bigger test perhaps is whether he sticks to Tuesday's script, which appeared to mark a climb-down in both structure and scale of the wall, a subject he returned to several times throughout the speech. He called it a crisis, but stopped short of declaring a national emergency as some had feared.

Mr Trump's delivery was more about salesmanship – his own – than anything else.

There were lots of mentions of what “my administration” has done. Current US economic growth – 3 per cent last year – is unprecedented and the biggest anywhere in the world, Mr Trump said. It is not. China grew 6.4 per cent last year. US growth is also forecast to slow to 2.3 per cent this year.

Wages are growing faster than in decades, ushering in greater prosperity. This statement was almost true. US Labor Department figures for December showed pay had increased at the fastest rate since 2009. However, inflation over the same period has wiped out any benefit for the same workers, according to the Pew Research Center.

Then came more talk about healing wounds and choosing “greatness over gridlock”.

Infrastructure was mentioned as an area Republicans and Democrats agree on, but if that remains the case it may not make any difference in the current environment. Mr Trump sought $1.5 trillion for such projects last year and he didn't get it despite Republicans then controlling both the Senate and the House of Representatives.

There were the customary supporting acts for a State of the Union address; the World War Two veterans; a policeman who survived being shot seven times at a synagogue in Pittsburgh to save others; a drug convict made good and a child cancer survivor.

But the human interest tales did not quite overcome the coldness of a meeting of political opposites.

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Will the pound fall to parity with the dollar?

The idea of pound parity now seems less far-fetched as the risk grows that Britain may split away from the European Union without a deal.

Rupert Harrison, a fund manager at BlackRock, sees the risk of it falling to trade level with the dollar on a no-deal Brexit. The view echoes Morgan Stanley’s recent forecast that the currency can plunge toward $1 (Dh3.67) on such an outcome. That isn’t the majority view yet – a Bloomberg survey this month estimated the pound will slide to $1.10 should the UK exit the bloc without an agreement.

New Prime Minister Boris Johnson has repeatedly said that Britain will leave the EU on the October 31 deadline with or without an agreement, fuelling concern the nation is headed for a disorderly departure and fanning pessimism toward the pound. Sterling has fallen more than 7 per cent in the past three months, the worst performance among major developed-market currencies.

“The pound is at a much lower level now but I still think a no-deal exit would lead to significant volatility and we could be testing parity on a really bad outcome,” said Mr Harrison, who manages more than $10 billion in assets at BlackRock. “We will see this game of chicken continue through August and that’s likely negative for sterling,” he said about the deadlocked Brexit talks.

The pound fell 0.8 per cent to $1.2033 on Friday, its weakest closing level since the 1980s, after a report on the second quarter showed the UK economy shrank for the first time in six years. The data means it is likely the Bank of England will cut interest rates, according to Mizuho Bank.

The BOE said in November that the currency could fall even below $1 in an analysis on possible worst-case Brexit scenarios. Options-based calculations showed around a 6.4 per cent chance of pound-dollar parity in the next one year, markedly higher than 0.2 per cent in early March when prospects of a no-deal outcome were seemingly off the table.

Bloomberg