The main event of today’s trading session was some comments from US President Trump that sent the US dollar soaring higher alongside stock markets around the globe, whilst precious metals took a turn lower. The moves are in keeping with those seen following the US election last year, as the markets anticipated the actions of the incoming president.These trends have been correcting for much of 2017, with market participants citing a lack of any tangible changes to the levels of regulation and no signs of any imminent tax reform alongside his unpredictable and “unpresidential” demeanor as likely reasons for the retracements.
“Phenomenal” tax reforms to be announced in the coming weeks
Today’s comments from Mr. Trump related to tax reform, with the US president stating that there would be “something phenomenal” announced over the next two or three weeks. Perhaps the comment was enough to reassure traders that Trump will follow through on his promise although to be fair he has been fairly unwavering on his stance on the matter. Alternatively it may simply be a case of the correction in the greenback reaching a natural level to resume its march higher, but either way today’s developments have the feel of a turning point for several markets. Due to the unpredictability of not only Mr. Trump but markets themselves, this could prove to be a false dawn, however another run higher in the buck and US yields now looks far more likely than it has for several week.
More record fall for US stocks
Whilst there has been a significant pullback in many of the asset classes that moved strongly following Trump’s election win, US stock markets have remained firmly supported and in the vicinity of record highs. Today’s news saw the US500 (+0.62%) break above the 2300 level for the first time as S&P futures joined the Dow Jones (US30 +0.64%) and Nasdaq (US100 +0.49%) in posting all-time highs this week. The German Dax (DE30 +0.70%) has shrugged off some early weakness in the week to trade little changed whilst the FTSE (UK100 +0.59%) has also joined in the broad move higher.
*Please note all stock indices quoted are futures and not the cash values and taken from the xStation5 platform
USDJPY back above 113
The USDJPY (+1.14%) has been one of the biggest beneficiaries of these comments and the pair has surged higher on the back of them. The broad based US dollar strength is evident in numerous pairs with the NZDUSD (-0.79%) declining further following last night’s RBNZ inspired sell-off and the USDCHF (+0.61%) rallying back above parity. One of the few currencies standing up to the advance in the US dollar is the pound, with the GBPUSD (-0.07%) little changed on the day and holding firm above the 1.25 handle on the European close.
Precious metals to lose their shine?
Gold (-0.47%) and SIlver (-0.37%) have both experienced some fairly sharp selling this afternoon after both were seemingly set to continue their recent march higher before Trump intervened. A rise in US yields, as shown by the falling Tnote (-0.33%) has weighed on both of these whilst proving supportive of the US dollar. Platinum (+0.43%) rallied strongly early on and despite some selling following the Trump comments the market is still on course for its highest close since the start of October.