Trump’s day in Congress

The first “event” today will be the Australian GDP number coming through at 11.30am. The expectation is for the economy to have grown at 1.9%, up from 1.8%. That’s a 4% or $1.3 billion expected increase.

bg_us_flag_531811
Source: Bloomberg

The current FX cross of AUD/USD has traded within a 28 point range for the past 4 days. More importantly it is testing $0.7760 resistance. A strong GDP number today could see the AUD/USD move over this key resistance and on its way to 80 cents.

The second 'event' today is Trump’s address to the US Congress, scheduled for 1pm ADST.
At President Trump’s address to state governors yesterday, the announcement of a $20 billion increase in military spending lifted military stocks like Lockheed Martin.

Today his 'phenomenal' tax cuts will be announced. The markets will take the announcement and very quickly decide if the recent 16% rally from last November is justified. The market is still trading at a discount to the tax cut numbers.

For the history buffs, George Bush Snr, also a republican, inspired the DOW to rally 150% from the lows in 1992 to the highs of February 2000. Both Bush and his predecessor Reagan ran a supply-side economic policy of lifting barriers to production and implementing tax cuts... sound familiar?

The VIX volatility indicator moved 3.5% higher to 12.53 overnight as traders took some protection against any downside in coming market sessions. The current VIX reading is the highest since 19 January. This type of risk-off saw the US utilities index also rally one percent as money moved to a safe haven investment.

It was the Australian utilities index that finished in the green yesterday, and may follow through today.

Along with the risk-off trade in play, a small rise in the US10Y bond saw an overnight lowering of the yield to 2.35 points, down 0.3 percent.

West Texas crude also settled lower at $54 and is maintaining a holding pattern at this key resistance level. Oil traders are exceptionally long at the front end with the current December 2017 futures pricing in at a flat $55.17.

Overnight there has been a slight risk off, with iron ore moving back to $91.27, down 1.15%.
Gold was down $2.20 overnight, remaining at a retest level of the breakout at $1250.00 on 23 February.

The ADR for BHP is lower at $24.55, down 1.8 percent from yesterday’s close of $25.00.

CBA’s ADR shows a flat open at $82.35.

The ASX 200 is expected to trade flat from the open with SPI futures down four points. With leads taken from the GDP release at 11.30am, traders would be wise to stay cautious of US futures pricing during Trump’s speech to Congress. This first address will take the form of a State of the Union address and comments about future action will be priced into the markets immediately.

The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication.

Find articles by analysts