It would seem that Donald Trump continues to have a hold on market direction and this continues into the enw week. News flow out of meetings with foreign leaders such as Japanese Prime Minitster Abe and Canadian Prime Minister Trudeau help to mould risk appetite, but now Trump’s domestic tax plan are suddenly impacting again. However, focus switches back to Fed chair Yellen who will also have a role to play. We look at the outlook for forex, equities, commodities and bonds this week.
Is it possible that Donald Trump has flipped market sentiment once more? As Treasury yields pick up from range lows and the dollar starts to rally once more, this is the question that traders will be contemplating moving into this week. The Trump reflation trade looks to be back on. This comes after news that Trump’s administration is currently working on a “phenomenal” tax plan which is due to be announced perhaps in a couple of weeks. Further details from Trump’s press office suggested that this could be the announcement on fiscal expansion the market has been waiting been looking for following Trump’s campaign promises. Reaction has been positive as it is a welcome change to all the negative protectionist measures that have dominated recently. It breathes fresh life into the bullish aspects of President Trump. It has improved risk sentiment with the safe haven plays which have been performing so strongly in recent weeks (such as Treasuries, the yen and gold) now reversing once more. Also the corrective trend on the dollar is turning positive again, whilst equities are also breaking higher. The confirmation of technical breakouts for dollar strength on the major pairs are still to be confirmed but the bulls are looking far more in control than at any time over the past few weeks. Focus will now turn to Yellen’s Congressional testimony this week for any comments on the impact on monetary policy that arise from fiscal expansion, but Trump still remains a key factor.