USD is simply unstoppable with the U.S macroeconomic data showing remarkable strength. It seems that nothing is capable of restraining the strong USD bullish trend and it seems that it will continue its momentum for a duration. We should have a significant risk event or geopolitical event that can reverse the current bullish trend. Traders should see at the moment some possible bearish retracement for a buying opportunity on longer term. It’s highly probable today that USD will provide of a chance to recover some losses for short traders.
Trump’s plans to introduce $1 trillion stimulus for infrastructure investment and tax cuts has created a huge sell off on U.S and global bond market. The US 10- year Treasury yield hit the highest level since July 2015 while the 2 year note yield (which is the most sensitive to higher interest rates and inflation expectations) skyrocketed to six year high. We cannot say that the latest sharp fall on bond market is a reversal of a bullish trend existing for the last decade which has strong foundations however it shows serious strength.
The independence of Fed is very questionable, many consider that Fed will disagree with Trump in a number of issues that includes monetary policy and fiscal policy, but we should not forget that Trump is the indisputable winner of U.S election, he joins huge popularity and trust from many different parts of the U.S /global system and U.S society. Fed is less trustworthy in the eyes of U.S citizens than Trump, the Fed will not have the power that many expect as the Fed members will appointed by Trump.
If Fillon is chosen in France this would make it more difficult for Mari Le Pen to get elected as the next president of France in 2017, since Fillon is very popular among the right wing and conservative voters. Unquestionably, it is too early to make predictions about the next French president however from what we have seen the last couple of years, is that as soon as we move close to the election date we see huge changes in voters choices.
The fact that the Italian 10 year bond yield is higher than it is the Spanish reveals market’s fear for a possible ‘’ No’’ vote. As we mentioned yesterday markets are very pessimistic about the upcoming Italian referendum. Renzi is very Machiavellian and we believe that he has the ability to win possibly even with a small difference the upcoming referendum.
Daily Key points:
• Dollar hits fresh 14-year highs after strong data
• The FOMC Minutes said any decision regarding to the overall policy framework “would not be required for some time.”
• FOMC Minutes: Most Fed officials saw rate hike appropriate ‘relatively soon’
• ECB Financial Stability Review: Risks To Eurozone Financial Stability Have Intensified
Daily Economic calendar:
|Germany||German Ifo Business Climate||Medium||110.5||110.5||EUR||12:00|
|Germany||German Final GDP q/q||Medium||0.2||0.2||EUR||10:00|
|Japan||Tokyo Core CPI y/y||High||-0.4||-0.4||JPY||02:30|
|Japan||National Core CPI y/y||High||5.47||5.43||JPY||02:30|