US traders returned to the market after the Presidents Day holiday on Monday to buy US equity indexes once again, driving the DOW (20743), S&P500 (2365) and Nasdaq (5866) to all-time highs. The temptation for traders to pick the highs in these US indices is growing – and for good reason. Should Trumps Tax Plan announcement next week fail to please the market, one would expect a sharp reversal in these markets. Given recent Hawkish comments from Fed members, should Trumps Tax Plan be received well, shorts will struggle.
Earlier this morning, the Federal Reserve’s Harker reiterated Janet Yellens recent testimony, by suggesting a March rate hike is a possibility. There’s currently a 27% chance the Fed will rise 3 times this year.
Some weak PMI numbers from the US saw the Dollar index fade throughout the remainder of the US session. This saw the AUD/USD reverse its earlier losses to reach 0.7684 this morning, and avoided the EUR/USD from testing the 1.036/1.034 support levels from January.
Traders advised to keep a look out for updates from the House of Lords Brexit debates – proposed amendments to the bill are likely to create opportunities in the GBP market. EUR/GBP approaching support at 0.83351 – a possible short trade for those who believe European political instability will continue and a relief rally in the GBP, due to favourable Brexit conditions, could play out.
The White House named Lieutenant General H. R. McMaster as its new national security advisor, replacing Michael Flynn. While not the most important news of the year, markets like certainty. Basically, it provides the market with some reassurance that the Trump administration is fully functioning.
RBA Governor Lowe this morning stated again the banks’ outlook is for 3% GDP growth over the coming two years, accompanied by a gradual rise to inflation.
