US and European futures fall following another White House resignation
Whilst US indices managed to book a positive finish overnight, the futures are tanking as the revolving door at the White House is once again in action. The resignation of Trump’s top economic adviser Gary Cohn over fierce disagreement to Trump’s tariffs, goes some way to highlighting the rift that Trump is creating, not just on the global platform but also within his own administration. Furthermore, if Cohn, who has been actively opposing protectionism, is resigning, this naturally leads to the conclusion that Trump has won and is serious about his tariff’s.
With Cohn’s steadying influence no longer steering economic policy in the Trump administration, in addition to Trump’s commitment to his nationalist trade agenda, market participants are growing increasingly nervous of where the Trump administration is going. As a result Dow futures plummet 300 points after the bell.
As concerns over the direction of the Trump administration pulled US futures lower, Asia followed suit, with the domino effect also leading European bourses towards a negative start. On the FTSE house builders are expected to be under the spotlight following the release of the Halifax house price index. Investors will be hoping to see a pickup in house prices after they fell for a second straight month in the three months to January.
Cohn’s resignation sends USD/JPY to 105.50
Market nerves are also being played out in the Japanese yen as flows in to the safe haven currency increase. USD/JPY dropped some 50 points on Cohn’s resignation before bouncing off session lows and an established support at 105.5. A meaningful break below 105.5 could open the doors to support seen at multi month lows of 105.25. On the upside, a push through 106.00 could see gains extend to 106.2.
Dove Brainard sounds increasingly hawkish
Elsewhere, the softer dollar was finding some support from hawkish sounds coming from known dove Fed Governor Leal Brainard. Brainard, who has always aired on the side of caution regarding tightening monetary policy, actually sounded more concerned that the Fed weren’t moving fast enough, when she appeared on Tuesday, saying economic tailwinds could push up the path of interest rate rises.
After disappointing economic data in the previous session, which saw factory orders record the first fall in six months, investors will be looking towards US ADP private payroll data for confirmation that the US labour market is tightening ahead of Friday’s non-farm payrolls.
Eurozone GDP ahead of Thursday’s ECB
The spotlight is expected to stay on the euro in today’s session, with the release of eurozone GDP figures, ahead of the ECB rate decision announcement on Thursday. Economic growth is expected to remain at 2.7% year on year, as the eurozone economic recovery continues at a strong pace. An inline or upbeat reading could be the final box ticked for the ECB to tweak forward guidance.
EUR/USD is trading higher in the overnight session, showing no signs of slowing down heading into its fourth straight winning session and extending a rebound from last week’s one month low of $1.2150. The pair has broken through several important levels of resistance, potentially targeting $1.25.
Opening calls
FTSE to open 50 points lower at 7096
DAX to open 96 points lower at 12,017
CAC to open 44 points lower at 5126