Yesterday was one of the more negative days we’ve seen thus far this year, sentiment as a whole was sour across the board, with only the major safe haven currencies really enjoying any demand. Stocks in Europe closed lower on the day while in the US indices suffered one of their worst days since Trump was voted in before a slight recovery later in the session. They still closed lower on the day having had their worst day in 2017. Some of the selling was likely month end rebalancing after the gains seen already this month but once again uncertainty caused by Trumps policies, most notably his weekend travel ban on passport holders for several Muslim majority nations, has brought some to question where all this is going especially as, for markets, there has been almost no focus or mention of what his policies will do for the economy and as always, uncertainty of any kind is negative for markets.
JPY was one of the most dominant currencies on the day, the old school safe haven rallying some 1.8% against the USD, while it was up over 1.5% against GBP, the next in line for safety flows was the Euro, initially under pressure following weaker German inflation data, the single currency rallied from lunch to cover the 1% decline experienced earlier in the day. There is a whole host of central bank meetings this week and this is perhaps another reason for the caution to end the month, the BOJ were first up overnight and kept rates steady with asset purchases unchanged.
The euro shrugged of weaker CPI data from Germany yesterday, despite selling through the morning, its safe haven demand saw it rebound through much of the evening session and thus far is relatively flat this morning. The Euro however will always remain exposed to weaker data and ECB commentary and we have both this morning with GDP and CPI data, as well as the ECB’s Mario Draghi and Mersch due across the wires. Should we see flattish growth or any weaker inflation reading then we would expect to see Euro selling begin once more. The ECB have been resolute and while the market appears to want to talk about the ECB “tapering” or looking to end their easing program, the ECB continue to say they remain ready to act as required and could extend and expand their current program again if necessary. EURGBP find resistance towards .8580 intraday, a break above there likely to favour a move as high as .8675 area. While downside towards the .8500 area should hold for now, with the months lows of .8470 attracting below. 1.0775 represents the month highs and should hold any moves topside for now, while 1.0600 region should see some buyers emerge again.
Consumer confidence headlines the US calendar this evening but most will be focused on what is happening politically. There is certainly a broad feeling of discontent for those that oppose Trumps’ policies but he is also following through on his campaign promises that got him elected. The concern is that for many, these appear to be rash judgements and already many are questioning the legality of his decisions. This growing discontent has also seen global rallies against Trump, and again we have to remove ourselves from the political aspect of this as everyone will have their own side but instead we look to focus on the economics, all this creates is uncertainty and for the US and USD this is negative news and for now markets are showing that sentiment.