The US dollar stabilised at lower levels overnight, consolidating its late afternoon plunge which in turn ignited major rallies for other currencies.
President Trump indicated he thinks the US dollar is getting too strong, that he likes and respects Fed chair Janet Yellen, that he hasn't decided whether to give her another term or not and that he likes lower interest rates. This represents a big about-face from his campaign comment where he accused Ms Yellen of keeping rates artificially low and indicated he would replace her at the end of her term.
Anticipation President Trump's policies would be inflationary and pressure the Fed to act more hawkishly going forward sparked a huge rally in the US dollar after the election. The Trump trade has already been unravelling between difficulties getting his agenda through Congress and foreign distractions, and these statements further suggest that the reality of governing is catching up with campaign rhetoric.
The Japanese yen and gold have continued to climb overnight while stocks have been sliding, indicating that capital continues to flow from risk markets to defensive havens ahead of the 3-4 day Easter holiday weekend. AUD has been the strongest performer, rallying on a huge 60K increase in Australia jobs reported overnight, regaining $0.7500 and pulling NZD back above $0.7000. CAD has also continued to strengthen despite a decline in WTI crude oil which is digesting the gains of recent weeks.
Today brings another big test of the foundations of the Trump trade, the first three big US bank earnings reports. Financials were one of the sectors that led the big post-election rally and today we'll start to find out if earnings have been able to keep up with higher expectations and valuations. Initial results from JPMorgan, Citigroup and PNC Bank have been very strong, with Wells Fargo slightly above expectations too. With the news positive, today’s market reaction may indicate if traders are looking to news for reasons to add to positions or for reasons to take profits and lock in gains.
Even though exchanges are closed after today, there are a number of significant reports due before exchanges reopen on Monday which could impact forex and futures trading. Friday morning, US retail sales and consumer prices are out while Sunday night, China GDP, retail sales and industrial production could provide an active kickoff to next week as Asia Pacific trading resumes.
JPMorgan Chase $1.65 vs street $1.51
Citigroup $1.35 vs street $1.23
Wells Fargo $1.00 vs street $0.96
PNC Bank $1.96 vs street $1.83
Significant announcements released overnight include:
NZ REINZ house sales previous (14.2%)
NZ manufacturing PMI previous 55.2
NZ food prices previous 0.2%
Singapore GDP street 2.6%
China trade balance street $12.5B
China imports street 15.5% vs previous 38.1%
China exports street 4.3%
Australia employment change street 20K vs previous (6K)
Australia full time jobs previous 27K
Australia part time jobs previous (33K)
Australia unemployment rate street 5.9%
Germany consumer prices street 1.6%
Upcoming significant economic announcements include:
8:30 am EDT Canada new house prices street 3.1%
8:30 am EDT Canada manufacturing sales street (0.7%)
8:30 am EDT US producer prices street 2.4%
8:30 am EDT US core PPI street 1.8%
8:30 am EDT US jobless claims street 245K
10:00 am EDT US consumer sentiment street 96.5
10:30 am EDT US natural gas street 11 BCF
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