President Trump made his speech to congress and while it was rich in words, it did not give as much detail regarding his policies, as some might have hoped for.
His talk centered on immigration issues, city crime and drug abuse, with recurring themes of deregulation, big infrastructure projects like the Dakota pipeline and attacks on the The Trans-Pacific Partnership (TPP) treaty.
Some insight was given at least regarding the Border Adjustment Tax (BAT) – a tax that will be applied where goods are sold, not where they were produced. This will act in a similar way to Value-Added-Tax (VAT) or Goods and Services Tax (GST). Such a tax, according to its proponents, would have the following effects:
-Create more jobs
-Raise taxes from importers
-May cause USD appreciation.
However, Mr. Trump has stated numerous times that he has a vision for a weaker dollar as the lower price of the Greenback would drive exports while increasing the price on imports.
The US stocks responded favorably. S&P has gone from 2363.2 in the beginning of the month to a steady 2390.6 as of now – an increase of 1.15% so far. The Dow Jones Industrial Average has broken through the record 21,000 barrier and is currently sitting at 21,115.55, 24.95% yearly increase. NASDAQ composite index has went up +4.75% this month or +25.53% on a yearly basis. The NYSE composite index has went up +3.98% this month and +18.54$ on a yearly basis.
Similarly, Asian stocks are also performing well. Nikkei is up +3.44%, Topix is up +3.59%, Hang Seng +2.34%, CSI 300 +1.39%, S&P ASX 200 +2.32%, MSCI AC Asia Pacific Index +2.00% all on a monthly basis.
By contrast, European indices have not been performing as well, lagging behind: Euro Stoxx 50 Pr +3.94%, FTSE 100 INDEX +3.34%, DAX INDEX +3.64%, CAC 40 INDEX +3.45% and IBEX 35 INDEX +3.53% all on a monthly basis.
Currency wise, the CHF has dipped due to the unsatisfactory Q4 GDP report. The price dropped by 0.06%. Overall, the GDP data was still more favorable for the SWISS 2016 (1.3%), compared to 2015 (0.8%).
The Canadian economy has shown growth of around 2% the past year, but the GDP data for December is yet to be seen. Some analysts suggest a growth of 0.3%, opposed to the expected 0.4%, but the BoC has also warned that data might be higher than expected. Caution is advised when trading the Loonie.
The Greenback will most likely not be affected by the expected release for US unemployment claims. While the number might go slightly higher by around a thousand from 243,000 to 244,000, provided that the digit stays around 250,000. Markets will be content as any deviation might be explained with seasonal adjustment of the labor market. Despite this potential change, the unemployment rate is record low, showing good job activity.