The US stock futures rallied as the US Senate finally approved the Republicans' much discussed tax reform. The S&P500 (+0.62%) and the Dow Jones (+0.91%) futures gained, the US dollar strengthened against all its G10 counterparts. The US 10-year yield jumped to 2.4187%. The market is focused on the US' historical tax overhaul rather than political tensions and investigations on Donald Trump. The positive trend in the US stock markets could stretch to uncharted territories at the Monday open.
Asian stock markets were mixed. European and British stock markets opened on a positive note. The FTSE 100 and the DAX rallied by 0.80% and 1.20% shortly after the opening bell. The Britain’s industrials gained past 2% on hopes that the trade policy changes in the UK could benefit to some businesses.
The softer pound helped as well. Cable eased at the start of the week, as some traders preferred realizing their profit on last week’s rally and avoid the Brexit risks as UK PM Theresa May meets the EU’s Jean-Claude Juncker for lunch today. There are still pending issues such as the Brexit settlement deal, the Irish border and the EU citizens’ rights after the divorce. The pound could give back its recent gains if the EU/UK officials do not conclude that enough progress has been made to start discussing about the post-Brexit trade relationship. The downside risks prevail in the currency markets. US dollar appreciates against G10 majors
Safe haven assets edged lower on Monday. Gold eased to $1’271.20 and the downside correction could extend toward the 200-day moving average ($1’267) as investors move toward higher yielding, low risk assets such as the US treasuries.
The USDJPY advanced past 113.00. The Bank of Japan (BoJ) Governor Kuroda reiterated that his team will continue conducting an ‘extremely accommodative monetary policy’. The divergence between the Federal Reserve (Fed) and the BoJ’s policy outlook is supportive of a further appreciation in the US dollar against the yen. The MACD (Moving Average Convergence Divergence) indicator turned positive, suggesting that the USDJPY’s upside correction could gain momentum. The key resistance stands at 114.75/115.00 area.
The antipodeans slid. The Aussie (-0.24%) and the kiwi (-0.68%) weakened against the greenback. The AUDUSD trades under the pressure of negative rate differential despite the recent jump in yields. The AU 2-year yield advanced to 1.78%, as the US 2-year yield traded past 2.80%. The AUDUSD's bias remains negative, as the AU/US 2-year yield spread. The pair could extend losses toward 0.7530 (lower Bollinger band) before 0.7500 level.
The single currency kicked off the week downbeat against the US dollar, the Swiss franc and the yen. Latest news revealed that European leaders are pressuring Martin Schulz to form a coalition with Angela Merkel. Schulz said that the SPD has options and that a grand coalition is not a predetermined outcome. Tensions in German politics will unlikely squeeze the euro markets. The EURUSD’s short-term direction will likely be defined by the US news. Resistance is eyed pre-1.1900. The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced. Losses can exceed deposits.