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Greenback finds footing despite US healthcare bill woes.
We have a relatively quiet run into the weekend break in terms of economic data, which leaves Donald Trump’s healthcare reforms very much in focus for the day ahead. Yesterday’s vote in congress has been delayed and the President is threatening that failure to pass the bill will see him move straight on to tax reform. The market wants to see progress here, as it’s the prospect of tax breaks that has been very much behind the equity market rally, but without the healthcare overhaul, the scope for change is rather limited. If equity markets are looking for a reason to sell off, this could very well prove to be the trigger.
 
The Traders’ View
 
Our prop desk has been dialling back exposure running into the weekend break. A significant long cable position was closed out yesterday at a healthy profit, although a long oil trade has drifted offside.
 

Fundamental Analysis – Greenback finds footing despite US healthcare bill woes.

 
The US dollar has been in an upbeat mood through the Asian session with the dollar index pushing back towards the 100 mark despite a relative death of data, with the market shrugging off – at least for now – any concerns over that delay on Donald Trump’s healthcare reform bill vote. We’ve seen some updates out of Japan, which fell a fraction short of expectations, although the manufacturing PMI print still remained comfortably above the break-even 50-mark so this could make for interesting reading heading into the weekend break. There’s some belief that these dollar gains should have been more pronounced but the political uncertainty is putting a cap on the upside – failure to pass the healthcare reform bill later today could see fresh downside pressure being heaped onto the greenback.
 
The UK will see mortgage approval data released at 9.30am GMT and this could offer the pound another shot in the arm. We are seeing some nascent signs of a rally for sterling although it’s the thought of a rate hike rather than the general idea that the currency is simply oversold that is the key driver here. Anything that shows the home buying market looking upbeat will add weight to the idea that the economy is in good shape and can finally stomach the idea of a rate hike – something that hasn’t been seen in London for almost a decade.
 
We have the US durable goods order data due for release at 12.30pm today and again this could offer some short term distraction from the political malaise. By all accounts that healthcare vote in Congress will be the bigger driver of sentiment today, but any notable shortfall here could knock confidence in US equity indices. Despite that big sell off on Tuesday and the repeated message that stocks are overvalued, the DOW has been resilient for the last couple of days. This release could be the trigger for the next leg lower.

This article comprises the personal view and opinion of the STO Investment Research Desk and at no time should be construed as Investment Advice.
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