Market Brief: Donald Trump fails to ignite market

11 Sep 2018

Lewis Thorn

Dealing team

Last night US President Donald Trump used his inaugural State of the Union address as a platform to urge Congress to make bipartisan compromises.

Today's data releases
  Key levels
10:00 EZ preliminary HICP      
13:15 US ADP report   Support Resistance
15:00 US pending home sales GBP/USD 1.4083 1.4213
19:00 Fed rate announcement GBP/EUR 1.1369 1.1427

Market overview

Last night US President Donald Trump used his inaugural State of the Union address as a platform to urge Congress to make bipartisan compromises. In attempt to bridge the differences with the Democrats, Trump offered to provide ‘Dreamers’ (people brought illegally to the country as children) with a pathway to citizenship over 10 to 12 years. This is in exchange for funding a border wall with Mexico and ending the visa lottery immigration system in favour of a merit-based one. His refusal to back down on some of his most contentious policy positions is seen as an effort to appease the Republican voter base ahead of mid-terms in November. While the President argued that this was a “down-the-middle compromise,” Democrats signalled their disagreement by hissing after he announced new restrictions on how many family members legal immigrants can bring into the country. He also used his speech to highlight how during his first year in office the stock market had risen to new record highs and the unemployment rate had continued to fall. With little mention on new policy or the dollar the market reaction was relatively muted.
 
Data already released this morning showed January’s GFK consumer confidence index provided a surprise rise in consumer sentiment with the index rising to -9 from December’s outturn of -13. Market consensus had been for a figure of -13 (Investec -12). Underpinning the improvement in the index was a firming in consumers’ personal financial situation both over the last 12 months and their expectations for the next 12 months. Indeed expectations for the next 12 months rose 4pts to +6. At the same time confidence in the general economic situation firmed as did the major purchase index which rose 5pts to +1. Overall consumers’ morale at the start of 2018 has picked up thanks to improving sentiment around their own financial situation and the more general economic outlook.

The day ahead

On the data front today, most of the focus is on the US with the ADP report and pending home sales data due for release this afternoon. The main area of focus will be on the Fed rate announcement which will be Janet Yellen’s last before Jerome Powell takes the hot seat. Additionally, preliminary HICP figures are out for the Eurozone later this morning.f immigration which has served as a road block to a longer-term spending bill being agreed so far. 

Thought of the day

This evening at 11pm is the official deadline for all football transfers to be wrapped up for clubs in the UK. Notoriously a frantic day, with clubs making panic buys and player handing in eleventh hour transfer requests. The most shocking transfer deadline deal has to be when Manchester City flexed their muscles and stole Robinho from under Tottenham and Chelsea’s nose! In the end the £32.5m Striker turned out to be a panic buy to make a statement and ended up leaving the club just two years later after an unsuccessful stint at the club. £32.5m for a Striker is now a drop in the ocean - Man City has just spent £57m on a defender! Their defensive spend this season has now topped that of the annual military budgets of 52 actual countries. If you have a last minute deal to complete, football related or not, please speak to your Investec Dealer about how we can manage your FX exposure outside of normal trading hours.

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