After yesterdays Fed Meeting minutes’ ambiguity, overnight, US Treasury Secretary Steve Mnunchin stated he wants to see “significant tax reform passed before Congress’ August recess”. The realities of passing complex, and as yet unknown, plans are starting to creep into the market. Consensus is building that Trumps promise of ‘phenomenal’ tax plans may not deliver – particularly as the President has virtually zero track record.
As an aside, Trump also continued his support of a weaker US dollar to boost export activity. He also stated “I certainly support some form of border tax”. This will have implications for not only for Mexico and the US, but also Canada who trades in significant volume with both countries.
Overnight saw the Dollar Index and US Treasuries slip giving gold a bid, up $13 during trade, pushing the precious metal out of its recent rage and hitting Nov-2016 levels. The 1,300 level is on the radar.
AUD/USD reversed weak CAPEX results yesterday afternoon and overnight pushed convincingly through the 0.77 level to trade at the top of its 10-month range. The pair also tested higher than last week’s Employment figures – which had very weak Full Time figures. A close through 0.7744 resistance will indicate further strength.
The pound also strengthened against the USD, rallying from 1.243 to 1.256, returning to Feb-9 highs. This has seen the EUR/GBP pair resume its direction toward strong support at 0.8350 and continues to present an ‘Uncertainty Vs Certainty’ trade as ’European political instability’ Vs ‘Brexit talks flowing smoothly’ plays out. A classic head and shoulders pattern has also formed in this pair on the daily chart over the last 7 months.
A small tick up in US unemployment claims (244K vs 242K) and a small rise in US Crude stockpiles (0.6M Vs 3.4M) snapped a four-week streak of oversupply but continued its seventh week increase in inventories.
Quiet on the economic data front in the Asian session today. RBA Gov Lowe testifying at the House of Representatives in Sydney at 9:30 (AEDT) this morning.
