Much of yesterday was a non-event, markets were waiting to hear what came of Trump’s tax plans but there was certainly an air of disappointment when finally released. The outline consisted of no more than 200 words and just seven numbers, most of which had already been touted by Trump pre-election. There does not appear to be any additional information and the takeaway was rather muted.
For much of the day stocks held firm, however post release we saw a sell off in the US as markets questioned the feasibility of such a plan without any real information. We highlighted yesterday that a “wish list” would not be enough to keep markets supported, markets want to see real action from the US administration at this point. The USD had traded higher for most of the day but again closed just above flat after giving back gains into the end of the day. Focus for the US will be back to the data, it’s been a quiet week thus far but today we have trade balance data and durable goods orders on tap. The USD index remains near its 6.5mth lows, US treasury yields continue to find themselves under downside pressure and if the USD is to pick up it needs data to be firm.
The ECB headline today’s calendar and markets are expected a change in tone from Mario Draghi. Thus far this year the ECB rhetoric has been mixed, they felt markets had misinterpreted them initially in February, as they still saw downside risks. However, given the result of the French election at the weekend and the steady flow of data from the Eurozone, markets are now looking for signs the ECB will begin to wind down their QE program.
The recent strength in the Euro would certainly suggest that unless we get that from the ECB today, the single currency may well face some selling. EURUSD has held above 1.0900 for now, rallies thus far running into selling above 1.0950, while downside support holds between 1.0835/55 area. A daily close above 1.0980 will favour upside in EURUSD for me. EURGBP however is facing some pressure from the pound, we broke back below .8500 yesterday, with lows of .8450 this morning. Markets will be looking for Monday’s gap higher to close, that will bring us back down to .8370 or so. While any upside is finding sellers at .8530.
It has been a quiet week for data from the UK as well, and markets are still the election news, with focus on that GBP has been more or less consolidating. GBPUSD however did break out of it range this morning to highs above 1.2900 before running into some sellers.