Equity indices relished potentially bullish news yesterday, making new record highs, after President Trump stated that he would be announcing tax reforms within the next 2-3 weeks. Equity traders jumped on the band wagon of the potential of fiscal stimulus which if done as expected will result in higher bottom lines for business. The energy sector also helped keep equities bid as crude oil managed to push higher disappointing bears. The NASDAQ 100 finished up 0.30%, the DJIA finished up 0.58% and the S&P 500 finished up 0.57%. The bullishness carried over to Asia where investors snapped up Asian equities as a knock on affect which saw the Nikkei 225 gain a whopping 2.6%, aided by the weakening of the JPY vis a vis the USD. Chinese stocks relished on the positive sentiment and better than expected trade data resulting in the Hang Seng gaining 0.6% while the Shanghai Comp gained 0.5%
In FX, the USD remained firm after Trumps comments with the USD Index, a measure of the strength of the USD against a basket of currencies, pushed north after initial selling pressure was halted at the 100 level. This saw the USDJPY break above 113 while the EURUSD headed back to 1.0650 and the GBPUSD broke below 1.2500
In commodities, gold finally gave in to bearish pressure as the precious metal topped out at 1244.50 before dropping back to 1220 much to the delight of bears who have been feeling the brunt of the recent bullish squeeze which has resulted in gains of over 120 USD the DEC lows. Crude oil continues to have a negative bias in the medium term but bulls have managed to turn around short term trade by pushing through 53.50, defying selling pressure as traders anticipate an uptick in demand due to Trumps new reforms.
Looking ahead, the UK is set to release its Manufacturing Production figure, expected at 0.3%, which will outline the health of the manufacturing sector in the UK and the UK economy at large. Better than expected results will imply broader economic stability and result in a strengthening of the GBP while lower than expected figures will see the GBP weaken. Also of interest today are the labor statistics from Canada, where we are expecting the Employment Change figure which represents the change in the number of employed people during the previous month. A better than expected release, in which more people were employed than expected, will result in a strengthening of the CAD and vis versa if the number comes in lower than expected. Capping off the day is the Prelim UofM Consumer Sentiment data, which will give traders a clue into how the American public views their current and future financial situation, a higher than expected release will imply more confidence end hence a strengthening US economy which will bode well for the USD while a worse than expected release will see the USD weaken.