Digesting Trump
|The day so far
A lack of major news flow overnight has kept the focus on Trump’s speech which was negatively received in terms of market reaction resulting in some additional selling of the USD as European came in this morning. The fact that the President-elect’s speech lacked detail on policy and was more centred on addressing recent press allegations reflected a figure more concerned about his public perception rather than giving clarity as to his administrations plans moving forward. Certainly from a trading point of view the event offered undoubtedly the best trading opportunities this week and given the rally in US assets heading into the press conference the market was ripe for a correction intraday on a underwhelming delivery. Hence forth, I would be vigilant whenever the next speech is scheduled beyond the upcoming inauguration which will likely to a very rehearsed affair.
Looking elsewhere, gold futures are now trading back above $1,200 which is a key psychological level and reflects an impressive about turn in the yellow metal over the last few weeks. Trump implementation risk was further fuelled yesterday by his dismal display but with the political road bumps to come in Europe the associated risks look set to keep gold above this key level for the time being.
The day ahead
Looking forward there is little on the calendar to excite from an economic data point of view but do be aware that there is a plethora of speakers from the Federal Reserve, which includes the likes of Harker, Evans, Lockhart, and Bullard, all talking about the economic outlook. Thus far Fed speakers this week has shown little deviation from the Fed script delivered with their December hike but given the timing of Trump’s latest speech I would be vigilant for these events on the calendar.
In terms of the strategy for today we believe the Trump move is looking overdone and given the technical set-up we see it hard for the likes of T-notes to break beyond the highs that were seen this morning and in the context of price movement over the last 24hrs we prefer a short in EUR/USD and S&P. The only asset we favour a long direction in today is crude oil given the phenomenal rally that occurred yesterday in the wake of a bearish DoE report which makes us reticent to fight the trend higher.
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