Global sentiment in stock markets as well as the Dollar has continued to improve following Trump’s speech. Stock markets have continued rising globally posting new record highs
Yesterday the DOW Jones rose over 300 points or 1.46% to close at the highest it has ever been. Asian stocks also rose around 1% providing more confidence that the global economy is entering a growth cycle. European bourses outperformed, with CAC 40 up 2.1%, FTSE 100 up 1.6% and the DAX up 2%. At these levels, stocks are extremely overbought and positioning for a correction looks increasingly attractive.
Chances of a March Rate hike have surged to 80% in the last 24 hours and the USD strength could easily continue for the next 2 weeks as we approach the March 15th meeting. Since Donald Trump’s election, the S&P has put on almost 12% and set new all-time highs despite all the uncertainties surrounding the first hectic weeks of the 45th presidency.
The Dollar was already strong on the back of a few FED members stating that a March rate hike is very likely, however further advance was seen yesterday helped by rising stock sentiment. EURUSD, which is facing political risks especially from the French elections in May, dropped to 1.0511 from 1.0587. Support lies at 1.0470, 11th January low.
GBPUSD broke 1.2300, posting lows of 1.2259 in a day that saw it lose 140 overall. Huge rally was evident in the USDJPY pair which rose over 140 pips to 114.20 at time of writing. The pair was trading at 111.66 just 2 days ago, a rise that gives perspective into the Dollar’s strength in the last 2 days.
On Friday, there will be speeches by Fed Chair Janet Yellen and by Fed Vice-Chairman Stanley Fischer, which could well be the last opportunity to signal whether a hike in the Fed Funds rate is likely in a fortnight’s time