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March 2017

Market subdued after Trump’s speech to Congress

Published: Wednesday 01 March 2017

  • Market subdued after Trump’s speech to Congress
  • Speculation for a March Federal Reserve rate hike is becoming prominent 
  • Bank of Canada expected to keep rates unchanged
By Alex Field
 
The US Dollar has strengthened overnight. Most notably, against the Canadian dollar, which was brought down by oil prices; but also largely on the back of Donald Trump’s address to Congress.  While his address to a joint session of Congress gave the markets little detail, the positive tone was received well by traders, as well as the lack of any extreme comments that could cause worry. Trump touched upon tax reform and mentioned that his team "is developing historic tax reform that will reduce the tax rate on our companies so they can compete and thrive anywhere and with anyone" and would also "provide massive tax relief for the middle class". He however failed to provide further details on the controversial border adjustment tax.

Trump criticised Obamacare, and suggested that "mandating every American to buy government-approved health insurance was never the right solution for America". His administration is instead planning to "lower the cost of health insurance". Trump also reiterated the proposed infrastructural spending worth as much as USD 1 trillion. Trump went on to say that, “to launch the US national rebuilding”, he will be “asking the Congress to approve legislation that produces a USD 1T investment in the infrastructure of the United States, financed through both public and private capital, creating millions of new jobs".

On the markets, the speculation for a March Federal Reserve rate hike is becoming prominent once again. San Francisco Fed president, John Williams, has said he expects a rate hike to get "serious consideration" during the March meeting in Washington. He also mentioned that there was no need to delay the move. New York Fed president, William Dudley, said that due to recent economic data, the case for a rate hike "has become a lot more compelling". The dollar should continue to rise as the data continues to support a hike.

In terms of data, Australian Gross Domestic Product (GDP) has grown 1.1% quarter-on-quarter in Q4, above the expectation of 0.7%. New Zealand terms of trade figures have risen 5.7% quarter-on-quarter in Q4. China’s Manufacturing Purchasing Managers’ Index (PMI) improved to 51.6 in February, but Non-Manufacturing PMI dropped to 54.2. Caixin Manufacturing PMI rose to 51.7.

PMI data will be one of the main focuses of the day. The Swiss will release SVME PMI and the UBS consumption indicator. The Eurozone releases final Manufacturing PMI and German CPI flash data. The UK releases its Manufacturing PMI report and mortgage approvals data. This afternoon, the US will release personal income and spending, ISM Manufacturing and Construction spending data. The Federal Reserve is also due to later release its Beige Book report, which is a useful gauge of the US economy. The Bank of Canada (BoC) will announce its rate decision, which is largely expected to keep rates unchanged. 

Riddle

A thief enters a shop and threatens the clerk, forcing him to open the safe. The clerk says, "The code for the safe is different every day, and if you hurt me you'll never get the code". But the thief manages to guess the code on his own.

How did he do it?

The code is “different.” 
 


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