The main equity indices in the USA rallied on Thursday, as the proposed tax cuts, which were at the heart of Trump’s election manifesto, passed through the first governmental process, as the Senate House passed the Republican Party’s first version of the bill. The opposition Democrats may put up resistance to the bill and its overall framework further on in the process, most notably the fact that the bill (in its purest form) represents a $1.5 trillion per annum tax loss to the Treasury.
The alternative view to the Republicans’ determination, is that the tax which is lost, will simply be re-spent and recirculated directly back into the economy, therefore providing an indirect fiscal stimulus. However, in an economy and government overburdened and creaking with debt, losing tax revenue may be a difficult sell for all senators, particularly as the republicans want the democrats’ Obamacare (a form of universal healthcare) to be shelved, as part of the overall process.
In terms of USA fundamental news; jobless claims crept up last week, whilst continuous claims fell marginally, the export and import indices fell and missed forecasts. Industrial production beat the prediction by some margin, coming in at 0.9% growth, with manufacturing beating the forecast of 0.6%, coming in at 1.3% growth. Both the DJIA and SPX closed up approx. 0.80%, whilst USD/JPY rose marginally, as did the USD versus several of its main peers.
Sterling made gains versus its main peers as a consequence of the BoE panel gathered in Liverpool England, calming investor nerves by suggesting they still have monetary ammunition in their arsenal, to assist both the U.K. government and the economy. That support may become crucial during the coming months, as the Brexit situation becomes more time critical. Retail sales numbers worried sterling investors, coming in -0.3% YoY for October, representing the first negative reading since 2013. The reasons put forward for the fall were many and various; low wage rises not in step with inflation, consumer debt reaching worrying levels, a lack of economic confidence and Brexit looming. And with retail acting as the UK’s largest employer, the wider concern is that continuous poor retail performance may result in redundancies.
European news mainly concerned inflation metrics; CPI came in at 1.4% YoY, whilst registering a 0.1% rise MoM for October, neither reading altering any investor sentiment with regards to when the ECB may raise rates. European equity indices recovered from several losing days in series, to post reasonable gains of over 0.5% in most instances.
The Swiss franc was the currency most under pressure versus its peers during Thursday’s trading sessions, falling significantly in value as its safe haven appeal diminished on the day and generally only currency pairs involving CHF, were experiencing the type of price action allowing pro-active trading decisions to take place. Most other currency pairs were trading in extremely narrow ranges, offering up very little in the way of outstanding trading opportunities.
U.S.DOLLAR
USD/JPY closed up circa 0.2% on the day having traded in a very tight range. USD/CHF rose through R1 to R2, trading in a wide bullish range, closing out the day up circa 0.6% at 0.994. USD/CAD ended the day close to flat, resting on the daily pivot point, at 1.275.
EURO
EUR/USD fell by circa 0.2% on the day, trading in a very narrow bearish range. Versus the Canadian dollar and the U.K. pound, the euro fell by circa 0.3%, close to S1. EUR/CHF rose by circa 0.5%, rising steadily throughout the day, breaching R1 and rising just short of R2.
STERLING
GPB/USD rose by circa 0.2%, ending the day at circa 1.319. Versus the Swiss franc the pound rose by circa 0.7%, whilst breaching R2, closing out at 1.311. GBP/NZD rose through R2, before retracing marginally, to end the day up circa 0.5%, at 1.925.
GOLD
Similar to many securities on the day, gold price was contained in an extremely narrow bearish range during the day’s trading sessions, XAU/USD ended the day closing out at circa $1279 per ounce, down circa 0.2%, once again holding close to the 100 DMA.
EQUITIES SNAPSHOT FOR NOVEMBER 16th
• DJIA closed up 0.80%.
• SPX closed up 0.82%.
• FTSE 100 closed up 0.19%.
• DAX closed up 0.55%.
• CAC closed up 0.66%.
KEY ECONOMIC CALENDAR EVENTS FOR NOVEMBER 17th
• EUR ECB’s Draghi Speaks in Frankfurt.
• EUR Euro-Zone Current Account s.a. (euros) (SEP).
• CAD Consumer Price Index (YoY) (OCT).
• USD Housing Starts (MoM) (OCT).
• USD Building Permits (MoM) (OCT).
• USD Baker Hughes U.S. Rig Count (NOV 17).
