Preparing for the Trump Tantrum

US equities recovered moderately after the sharp decline yesterday, investors were in buy the dip mode during a rare US equities market pull back. Despite the amount of ink spilt over the health care vote, fundamentally the  US economic landscape looks bright, and investors were quick to snap up bargains. However, news of the deplorable terrorist attack in London held the upward momentum in check. US Congress will vote on the AHCA tonight, and with Republicans still approximated to be lacking the need votes, the Trump administration’s backroom negotiation skills will be put to the test whipping up the required tally to secure the 216 votes to pass. However, 12 hours is a decade in political time, and things can change in a heartbeat   IN other markets, JPY has been the biggest beneficiary of the haven rally  while  Industrial commodities had another week session led by declines in both Copper and Iron Ore

Handy Tool from the New York Times to monitor the House vote on Obamacare Replacement

Australian Dollar

The Aussie dollar has opened firmer at .7675  this morning after plummeting to .7640 overnight  as investors were more than willing to buy the long-awaited dip in  US stocks, supporting risk appetite. On the surface, it would appear that the Aussie dollar has been doing little more than been echoing broader risk appetite.But the Aussie was also the beneficiary of the weaker US housing data as, despite two rate hikes since December, the market still views the Fed as dovish and the weaker than expected housing data supported this bias.

On the Iron ore front, prices were dealt another blow when  Chinese  press reported  16 Beijing Banks had raised their mortgage rates.

Japanese Yen

USDJPY teased with 111.00 on haven flow. Yet with the weak US housing data, along with a sagging USD, it took little more than a feather duster sweep to take out support. This  triggering stops on the way to 110.80 before the pair regained some composure and for risk appetite to re-emerge.  

The USDJPY has opened bid in APAC with convictions apparently tied to the emerging news out of the Whitehouse that the Team Trump is considering some concession to the AHCA that would appeal to the House Freedom Caucus.

Worth keeping an eye on the headlines as so far only  USDJPY desks have  taken the bait, but the tail is for broader risk appeal

New Zealand Dollar

RBNZ  released its policy rate (the OCR) will remain at 1.75%, as was widely expected by the market.  IN typical knee-jerk fashion, and one can never be sure why, the Kiwi sold off 20 pips before pulling back. After glossing over the accompanying statement, there is nothing to suggest a change in the Bank’s neutral bias. Inflation is still expected a return to the midpoint of the Bank’s target range over the medium term, but the release was far from a game changer and failed to surprise the market one way or the other.

EURO

The market continues to consolidate at the top of the recent ranges as dealer remains on edge ahead of Thursday healthcare vote. With little on the economic calendar,  traders remain glued to the shifting tides of the health care negotiations and how that parlays into risk appetite.

China

US healthcare headlines are hogging the headline overshadowing the biggest l storyline. The seven-day repo fixing rates in China have spiked higher but  small lenders are reported to have missed payments in the interbank market early in the week, and shadow banks are having difficulty in receiving funding promoting the Pboc temporary liquidity injections

The increase in Repo rates can be explained away as the Pboc attempting to control financial asset bubbles and perhaps influence the Yuan   However if there are ongoing issues with shadow banks missing payments red flags will go up indicating something deeper rooted is amiss.