Donald Trump’s currency comments and Theresa May’s Brexit speech came at the right time to fuel momentum in the US Dollar correction. This may carry into Australian stocks today, especially in the resources sector.
Mr. Trump’s comments on the Greenback is being taken as confirmation that his Administration may try to resist the strong dollar consequences of adding fiscal stimulus to an economy that is already outperforming many of its peers in the developed world. It’s not clear what actions the Administration may take on this score although conflict with the Fed as it raises rates in response to an improving economy and higher inflation is one potential outcome.
Prime Minister May’s Brexit speech proved to be a sell the rumour; buy the fact event for short sellers in sterling. The contents of the speech had been widely foreshadowed and any new elements were supportive for the Pound. Confirmation that the final plan will be submitted to Parliament for approval is seen as providing opportunity for a moderating check on the Brexit outcome. The speech has also lifted market confidence in Prime Minister May as the Brexit negotiator to the extent that it is a realistic and logical response to what is possible given the way the UK people have voted.
Australian mining stocks will face a double negative this morning in the form of weaker commodity prices and a stronger Aussie Dollar overnight. The sector is likely to be a drag on the overall market this morning. This may be significant for downward momentum in the ASX 200 which finished on its low yesterday in an indication of negative sentiment.