While the outlook for the US$ remains rather mixed, given the prospect of a trade war, the stock markets have had a firm session on Monday as investors speculated that Donald Trump’s tough tariff talk won’t actually translate into the most severe protectionist policies. Who knows what is going to happen? The other currencies were rather also mixed, with the Euro finding some solid ground despite the Italian election resulting in a hung parliament to be led by the two anti-establishment parties, while Cable headed higher after a decent UK Services PMI was followed up by some improved Brexit headlines. The Yen weakened on hope that the trade war fears may be receding, and was also pulled towards 107.00 by some large option expiries that are coming up today. In other markets, stocks are up by around 1%-1.5%, while WTI has settled sharply higher (+2.25%) after a report of further declines in crude stockpiles at the Cushing storage hub, suggesting that solid domestic economic growth continues to support crude demand. The metals have been rangebound, as have the commodity bloc currencies.
Tuesday’s focus will be on the RBA Meeting, although no change is universally expected and the focus will be on the statement. Also note that the RBA Governor Lowe will be speaking towards the end of the US session/early Australian time tomorrow. Elsewhere it is a rather thin calendar today, with little out of Europe where they will still be digesting the Italian election results, or out of the US where the highlights will be the January Factory Orders and a speech from the Fed’s Dudley. Kiwi traders should note that the Global Dairy Trade Index will be released at around midday UK time. Speeches are also due from the BOE’s Haldane and the Fed’s Dudley.
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