Sentiment remained well supported through yesterday with stocks in Europe continuing on from their positive open. The pan-European Stoxx 600 closed the day up over 1.2% while the DAX and CAC were up 1.6% and 1.3% respectively. It was a similar story over in the US, where it appears Trump’s Tax bill will have enough momentum to pass today. To be honest it feels like the “positivity of Trump’s tax bill” has been priced in a number of times at this point, we certainly haven’t seen any aggressive selling when the bill hit speed bumps but we’ve seen a number of surges higher when it looks like it’s about to be passed. I’m not an equity analyst simply a market observer but the constant surge higher in stock markets without the slightest correction is certainly concerning from a risk perspective. The USD traded lower through much of yesterday, dollar selling appeared more driven by demand for other currencies like EUR and GBP amongst others, while USDZAR dropped over 4% following the successful vote for Ramaphosa for ANC president, which drove heavy ZAR demand. Sentiment overnight was not quite as bullish as the Nikkei traded some .15% lower but Chinese markets were up almost 1%.
GBPUSD was up almost .7% yesterday although we did see some sell off from the highs. PM May addressed parliament and following her first meeting with her Brexit war cabinet she conceded that the transition period would likely see the UK abide by EU customs rules up until 2020/1. This should certainly favour business confidence but how this goes down amongst pro-Brexit lawmaker’s remains to be seen and will almost certainly cause further infighting within government. That will not be helpful for trade negotiations which are now at the forefront of the UK agenda. The house is expected to be discussing Brexit today so we’ll be looking for the usual headlines from that. There is nothing in the way of major data today and GBP remains very range bound. EURGBP topside is limited to .8862, while support around .8760 holds, with firmer below at .8730. GBPUSD continues to see support ahead of 1.3300, while resistance to moves higher should hold ahead of 1.3500 area.
Weaker IFO business climate data released this morning was worse than expected but that had little to no impact on the euro. Stateside, we are also light on data today and some housing data will be unlikely to shift focus away from the tax bill. EURUSD did spike above 1.1800 yesterday and as high as 1.1834 before heavy selling dropped it back to 1.1777. That look to be the range for today unless we see something drastic hit the press headlines.