Trump Rouses the Dollar Bulls ahead of Today’s State of the Union Speech

Earlier in the Day:

Economic data released through the Asian session this morning was on the heavier side. Stats included New Zealand’s December trade figures, household spending, jobs data and retail sales numbers out of Japan, together with Australia’s December business confidence data.

There was some good news for the Kiwi Dollar, with New Zealand’s trade deficit narrowing from a revised NZ$3,480m to NZ$2,840m year-on-year, with New Zealand’s trade balance growing into a NZ$640m surplus, from November’s NZ$1,223m deficit, month-on-month.

China remained New Zealand’s largest trade partner, accounting for a large proportion of the increase in demand in 2017, with total exports hitting a record high in 2017, rising by 11% compared with 2016 to NZ$53.7bn.

The increase in exports was attributed to record value of dairy products exported, with the export value of dairy products increasing by 30% to NZ$445m.

The Kiwi Dollar moved from $0.73185 to $0.73215 upon release of the data, while managing to hold on to positive territory at the time of writing, up 0.01% to $0.7324%.

For the Yen, the numbers were a mixed bag, with December household spending unexpectedly falling 2.5% month-on-month and by 0.1% year-on-year, with forecasts having been for 0.6% decline and 1.6% rise respectively.

The fall in household spending was attributed to a 23.3% slide in spending on housing, with spending on education falling by 8.9% adding further downward pressure.

The Yen moved from ¥108.946 to ¥108.968 upon release of the data, with a better than expected job/applicants ratio suggesting that upward pressure on wage growth may be around the corner, though the disappointment from the fall in spending was evident.

While the household spending figures were negative, December retail sales surged by 3.6%, coming in ahead of a forecasted 2.1% gain. The Yen moved from ¥108.972 to ¥108.927 upon release of the data, before a rise to ¥108.70 at the time of writing.

For the Aussie Dollar, business confidence improved, with the business confidence index rising 4 points to +11 points, the highest level since July of last year, reducing the gap between business conditions and business confidence to just 2 points.

The Aussie Dollar moved from $0.80944 to $0.80940 upon release of the figures, with softer employment, inflation and forward orders figures weighing on the Aussie Dollar, which was down 0.30% to $0.8070 at the time of writing.

In the equity markets, it was a sea of red across the majors, with the Nikkei sliding 1.42% at the time of writing and the Hang Seng, CSI300 and ASX200 also seeing heavy losses, following Monday’s losses in the U.S, with rising bond yields leading to some profit taking ahead of a busy week on the data front and the FOMC’s first meeting of the year and Trump’s State of the Union speech also there for the markets to consider.

The Day Ahead:

Economic data out of the Eurozone this morning, includes 4^th quarter GDP numbers out of France, Spain and the Eurozone, together with December retail sales figures out of France and prelim January inflation figures out of German.

Focus will be on the GDP numbers this morning that could revive the EUR rally should the numbers impress, with the markets likely to respond to any uptick in inflation, though German consumer prices are forecasted to ease back in January, according to forecasts.

At the time of writing, the EUR was down 0.17% to $1.2362, with rising U.S Treasury yields providing much needed support for the Dollar through the start of the week.

For the Pound, there are no material stats to provide the Pound with direction, with Brexit noise and Dollar strength weighing on the Pound at the start of the week. BoE Governor Carney could shift sentiment later today, if there is any hawkish monetary policy talk, though gains may be short lived, with market focus remaining on Brexit progress for now. The House of Lords debate on the EU Bill may add further downward pressure on the Pound, if Carney’s unable to revive the Sterling rally.

At the time of writing, the Pound was down 0.26% to $1.4038, ahead of the next round of negotiations with the EU on Brexit.

Across the Pond, key stats through the U.S session include January consumer confidence and November house price figures.

While an uptick in consumer confidence will provide further gains for the U.S Dollar, the key driver through the early part of the week has been a more hawkish sentiment towards FED monetary policy ahead of tomorrow’s FOMC statement release.

At the time of writing, the Dollar Spot Index was up 0.17% to 89.463, with Trump’s State of the Union Speech likely to have an impact later tonight, where trade will likely be a key component of the speech.