Asia watches Trump speech for another brick in the wall | Daily Market Commentary with Jeffrey Halley
Asia’s markets will continue their deep Lunar New Year slumber today, but the session will not be without some entertainment. Reserve Bank of Australia (RBA) governor Philip Lowe will speak at 09:30 Singapore time with the street looking for clues as to the next move in interest rates. The main event, however, occurs at 10:00 SGT time with President Trump’s State of the Union Address. This could be market moving depending on whether his tone is belligerent. I won’t try to second-guess the President, but either way, it should be entertaining.
Otherwise, the data calendar is incredibly light across the globe today, which means the markets will likely move on headlines, be they political or economic.
Overnight stocks rallied on Wall Street with both the S&P and Dow Jones climbing just over 0.50%. This should keep the ASX and Nikkei supported on dips with the gold fall perhaps weighing on the former. Expect a sideways day with most of Asia still closed.
The dollar traded from the positive side against the majors overnight, with the exception of the AUD, which eked out a small rally as RBA held interest rates steady.
The real story was GBPUSD, which collapsed 100 points to 1.2940 on poor services data and Brexit jitters. The break of 1.3000 is a significant psychological level, and the GBP will struggle to hold above 1.3000 in the longer-term without a Brexit deal. The pound could continue falling faster than Theresa May’s popularity this week as the Prime Minister heads to Europe in a renegotiation pilgrimage. The reception is unlikely to be friendly.
Gold sold off again overnight on a more favourable risk environment but held support around 1,310.00 to finish almost unchanged. Gold bugs will take cheer from this today as the precious metal continues to show resilience on price dips. More good news comes from the Relative Strength Index (RSI), which has moved lower out of overbought territory.
Higher American Petroleum Institute (API) crude inventory figures saw WTI tumble 2.50% to USD53.60 a barrel. WTI now hovers just above critical support at USD53.00, with the possibility of stop-loss selling occurring if it breaks.
Brent followed its cousin lower but to a much lesser extent as Russia cut production in line with its agreements. The price action continues to look more constructive on Brent than WTI.