The weekend saw countless reports of the immediate effects of Trumps Executive Order to ban travel from 7 Muslim countries to the US. The move has dampened risk sentiment as investors now begin to tip toe around, looking to sell any large events. The dampened sentiment saw the USD Index, a measure of the US dollar’s strength against a basket of its competitors’ currencies, dip back towards the all-important 100 level as we saw the EURUSD move back above 1.0700 and the GBPUSD make an attempt on 1.2600 while the USDJPY relinquished the 115.00 level. The ban also has several companies in the US in an uproar, especially in the tech sector where a large portion of its employees are from outside of the US, and with several companies reporting that some of their work force has been affected by the ban and more importantly they are concerned about the wider reaching consequences of the said ban. Equity markets have been making record highs, day on day given trumps good for business stance, but his latest move will have investors initiating the breaks and perhaps selling off positions in anticipations of the uncertainty that will likely manifest and which is likely to intensify. As it stands, investors will be sensitive to any news which may add to uncertainty with traders poised to hit the sell button on both the USD and US equities if need be. On the other hand, if Trump can convince markets that his actions are for a long term good that will benefit business and the US as a whole, we will see the USD and equities tick up nicely.
Tonight’s key event is expected out of Japan as the Bank of Japan (BOJ) takes center stage with its release of the BOJ Policy Rate, expected unchanged at 0.1%, and the BOJ Monetary Policy Statement and Press Conference. The BOJ has been actively trying to stimulate the Japanese economy through relentless monetary stimulus in which it has been buying up government bonds in hopes of getting money into the hands of the people so that they may begin spending and stimulating the economy. At the same time devaluing the Japanese yen as a way to increase the competitiveness of Japanese companies in the global spectrum. The releases will either see the JPY weaken further if the BOJ strikes a dovish tone in which it promises more liquidity to markets by way of the printing press. However, should they site the recent strength in the USD and thus natural devaluation of the JPY as enough for now, we would see the JPY firm up.