Equity indices could not make a new high in US as the DJIA is facing strong resistance to gain area 20,000. President elected Trump proposed a tax cut that could trigger another bullish wave in the stock market, but the honeymoon with the financial community will be tested when the new cabinet will be confirmed by the Senate.
In the FX market EurUsd is trading in a short term range. The long term trend is still bearish and the parity could be reached if yields on US Treasuries continue to rise. As long that 10 year US Treasury bond has a yield below 3% EurUsd has probability to make a bullish wave. Expectations on rate differential need an adjustment to keep unchanged the risk premium, otherwise traders and investors will choose the currency that offer the best combination of yield and historical volatility. Sovereign bond market crisis could be a consequence of currency mismatches that negatively affected the banking sector or the corporate sector. A weak currency does not mean that will fix all the issues thanks to cheap exports. There are more complex relations that need to be estimated, especially when energy commodity, US denominated assets, bottomed last year. Liabilities of the financial system need diversification as the role of US dollar is risky to the international financial system when is linked to an economy that will implement serious protectionist measures. The Greenback would keep its safe haven status, but its role in international trade cannot be dependent on a country that will restrict the flows of international trades.
Today the economic calendar will offer several events that should have an impact on the British Pound. The currency increased its volatility, and is likely that intraday ranges will stay high for a while. Today at 09:30 GMT will be released the UK Industrial and Manufacturing Production. At the same time will be the turn of the UK Goods Trade Balance and then at 15:00 GMT NIESR GDP Estimates. at 15:30 GMT Crude Oil traders should pay attention to the EIA Stock Change.
US President elected Donald Trump will hold a news conference at 16:00 GMT.
Crude Oil is up 0.51% to 51 $/ barrel while Gold at 1,188 $/oz could test 1,200 soon. EurUsd trading at 1.0558 (+0.04%) and UsdJpy at 116.07 (+0.27%). GbpUsd unchanged at 1.2165.