Risk and Dollar Lower After Trumps Tax Plan Annoucement

We saw a general risk sell off across the market yesterday after President Trumps Tax reform announcement from Washington. As I said yesterday, I think the market is looking for details of the reform and what we got was confirmation of tax cuts, but not any details on how the potential $2tn bill will be funded. So the markets reacted accordingly and while we didn’t see a major sell off, I think we’re concluding that there will be some sort of tax reform and we’ve already priced that in, but it’s by no means a done deal at the moment and there is a long way to go to get it passed.

So for the currencies the main plays were in the Jpy and Jpy crosses as is to be expected, with UsdJpy off yesterday’s highs nearly 100 pips and AudJpy in particular lower with the Aussie on the back foot from weaker CPI data earlier in the day.

Looking ahead to today’s trading and expect there to be a bit more consolidation of positions on the back of the news from Washington with some more downside possible. The main event in the Asian session will the the BOJ and of course we don’t expect any change in the policy rate, but traders will be watching the statement, report and later the press conference for any changes, subtle or otherwise in the BOJ’s stance.

Later, into the European session and we have the second big central bank announcement of the day in the form of the ECB, once again, no change is expected but traders will be looking for any change of rhetoric with some bulls hoping that Sunday’s preliminary French election result will have had an influence.

Into the New York session and we have Core Durable Goods Orders data and the weekly unemployment claims numbers.

So we’ve got a potentially big day ahead of us for the currencies although, once again though I expect fundamental data to overshadowed by any further news from Washington and other Geo-Political considerations. Traders will be looking closely at the Asian stock markets this morning to see how they react to the overnight developments.

One other thing that I spotted going through the charts this morning was Cable’s recent range bound trading, it’s unusual to see it trading so quietly this year, so I’ve just got that feeling in my bones that there’s a big move ahead!

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