STO Fundemental - (Another) busy day for Donald Trump

As the month draws to a close, attention is squarely going to be focused on the US with a busy legislative and economic calendar slated. The dollar, US equities, US treasuries and quite possibly energy prices will find some direction off the back of the day’s events depending on the extent of detail we see, especially regarding the proposed US tax reform. Further afield, the catalysts for direction are going to be harder to call, although with the election season looking in Europe, the spectre of further bouts of populism remains front of mind and this could certainly serve to unsettle the Euro in the near term, too.

The Traders’ View

Our prop desk is selling the Aussie dollar against both the greenback and the Yen, whilst we’re also seeing some support for gold with buys coming in around the $1251.50 level. Wariness over the equity market rally is also in evidence.

Fundamentals – (Another) busy day for Donald Trump

Following a subdued Asian session, attention is focusing squarely on Donald Trump and comments he’s expected to make during the day ahead. We saw those headlines spending plans being floated yesterday, but detail was lacking so the scheduled interview on Fox News at 11am GMT, then his first ‘State of the Union’ address of a joint session of Congress at 2am GMT Wednesday will both be closely followed. Resulting sentiment might not only hit dollar crosses, but could also provide some fresh direction for equity markets – Wall Street limped higher yesterday, but as we’ve been noting for some time now, confidence in the rally does seem to be running rather thin and as it stands, futures markets currently point to the DOW opening a shade lower.

In addition to Presidential comments, the US also releases its latest update on Q4 GDP at 1.30pm GMT today and again this number will be closely followed as the market continues to hunt out clues over the Federal Reserve’s likely stance over a rate hike next month. Conviction over policy tightening has been ebbing of late so anything that looks a little weaker than may have been expected could well serve to pump US treasuries.

The US genuinely is dominating the agenda for the day ahead, with February’s consumer confidence figure on the table at 3pm GMT. This will be the first such print covering an entire month since Donald Trump took office so will again be worth watching. In addition to potentially providing direction over the timing of any rate hike, it will also reflect the health of the US economy, which is so reliant on consumer spending to maintain growth. Having already seen earlier this week how the Japanese Yen still holds a safe haven allure, any shortfall here could help drive USD/JPY back below the 112.00 handle.

We have some Australian data due for release later this evening including the AIG manufacturing index at 10.30pm GMT, but by all accounts the more interesting point for the Aussie dollar is a survey of economists that has just been released by the Wall Street Journal. This showed comprehensively that the country will now avoid falling into recession this year, not least because of rising coal price. AUD/USD is little changed in recent trade, but anything that raises questions over whether the Fed will need to pare its planned three rate hikes for 2017 could be precisely the sort of news to help drive the pair beyond recent highs.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.

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