European equities followed indices in Japan, China, Australia and Hong Kong into the red, after Donald Trump’s press conference last night caused investor to further unwind trades pegged to fiscal stimulus expectations. The US dollar extended declines, while gold advanced past $1,200/Oz.
- Donald Trump’s first press conference as president-elect spurred a brief bout of volatility in US financial markets before stocks, the USD and Treasuries drifted back toward pre-event levels as investors continue to wait for details on the Republican’s policy prescriptions.
- Trump said he would not divest from his vast business holdings as he takes office. Instead, the president-elect will turn over the operations and control of those holdings to a trust controlled by his sons.
- Trump also announced that he had considered letting the Affordable Care Act “implode” on its own, but had decided on a more forthright strategy to repeal and replace it “almost simultaneously”.
- He also conceded for the first time that the Russian government was behind the hacking during the elections, but declined to answer questions about whether he would remain sanctions imposed on Russia by President Obama.
- The S&P 500 Index rose 0.3%, driven by the energy and utility stocks, while health care shares slumped following further criticism of drug pricing by the president-elect.
- The US dollar weakened, reversing course shortly after Trump’s news conference which had very little substance regarding the economy and policy. The Bloomberg Dollar Index, which tracks the greenback against 10 major peers, slipped 0.2% and erasing an earlier rally of as much as 0.8%.
- The 10yr benchmark Treasury yield ended little change, falling 1bp to 2.37%, paring earlier losses of as much as 5bps.
- Industrial production in November rose 2.1% month-on-month and 2.0% year-on-year, beating the consensus estimates of 1.0% and 0.7% respectively.
- Manufacturing production over the same period gained 1.3% from a month earlier and 1.2% from a year before, exceeding predictions of 0.5% and 0.4% respectively.
- According to a Bloomberg news report, a growing number of analysts and investors feel that the prospect of a freely floating yuan is no longer a distant possibility, despite the financial risks of such an event.
- Free-float proponents say a quick transition to a market-determined exchange rate would allow China to preserve its FX reserves, re-assert control over domestic monetary policy and combat “currency manipulator” criticisms from a certain president-elect.
- However, maintaining a managed approach as it is doing now, allows policy makers to manage the pace of the yuan depreciation, preventing abrupt market swings that could destabilize financial systems.
- Spot gold rose 1.6% to a 6-week high of $1,204.77/Oz earlier, following a sell-off in the US dollar today.
- With key resistance at the current level of $1,200/Oz, a strong close in its session today should provide more momentum for the precious metal to advance towards the next resistance target of $1,230/Oz.
- Silver for immediate delivery reversed earlier losses to rise by as much as 0.5% to $16.8704/Oz. The target resistance point above is at $17.25/Oz.
- Crude oil futures expiring in February rebounded from a 1-month low, closing 2.8% higher in New York last night at $52.25/bbl. The rebound came after the release of a favourable US refinery report.
- Spot 1.4283
- USDSGD slid 1.0% last night to a 1-month low of 1.4242 amid US dollar weakness.
- Support and resistance levels come in at 1.4150 and 1.4410 respectively.
- Spot 0.7465
- AUDUSD looks set to extend its winning streak to 8 consecutive sessions, rising 1.2% to 0.7472 earlier.
- With 0.7385 being broken swiftly yesterday, the momentum in the short term remains to the upside, although fresh Aussie dollar selling is expected to come in around the 0.7500 resistance handle.
- The Aussie dollar have been buoyed by recent strength in iron ore prices.
- Spot 1.3131
- USDCAD broke through the 1.3200 support, declining by as much as 0.8% to 1.3120 last night.
- The next crucial level to watch is 1.3100, which is the currency pair’s 200-day moving average. The last time USDCAD fell below its 200dma which occurred last March, the pair declined a further 6%
- Spot 6.8919
- USDCNH slid 0.6% to 6.8753 following USD’s move lower in Asia today.
- The PBOC had earlier strengthened its fixing by 0.14%, to 6.9141 per US dollar.
- Spot 114.25
- USDJPY declined 1.8% to 114.25, its lowest point in a month, following Trump’s press conference last night which failed to shed light on his economic-stimulus plans.
- Spot 1.2224
- GBPUSD reversed earlier losses of as much as 0.8%, to rise 1.2% to 1.2272 following a weaker US dollar last night.
- The key support below comes at 1.2090 remains.
- Current weakness in the US dollar is expected to provide some reprieve for GBPUSD, however most analysts surveyed on Bloomberg expect the currency pair to resume its down trend as Article 50 nears.