Risk appetite returns after the Trump wobble

David Morrison Trade Nation

Last night’s turnaround on Wall Street saw all the major US indices bounce off the lows made at the beginning of yesterday’s session. This has been the catalyst for a sharp rally in European indices in early trade this morning. Investors got further encouragement to snap up marked down equities as crude oil steadied overnight. Despite this, the front month WTI contract continues to spend most of its time below $48. Investors seem wary of coming back in on the long side ahead of tonight’s US inventory update from the American Petroleum Institute.

The US dollar has also continued to recover this morning. Yesterday the Dollar Index hit its lowest level since early November - just days after the greenback began a rally in the aftermath of Donald Trump’s surprise election win. And once again, it’s all about politics. Monday’s initial sell-off in risk followed on from the Trump administration’s failure to get sufficient Republican support to repeal and replace Obamacare. The worry now is that those same Republicans will oppose Trump’s planned tax cuts, particularly as there will be no savings from repealing Obamacare. Nevertheless, investors are once again putting their trust in the new president and for now seem happier to buy the dips than sell the rips.

Author

David Morrison

Trade Nation

Senior Market Analyst at Trade Nation since August 2019. David's role is to build value and growth through customer acquisition and retention via market commentaries, blogs and vlogs.

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