Incisive market commentary from David Morrison

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Collapse 2017 <span class='blogcount'>(348)</span>2017 (348)
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EURUSD breaks above resistance - PM Bulletin
31 Jan 2017
Equities recover after Monday’s sell-off - AM Briefing
31 Jan 2017
Trending markets and Andrews’ Pitchfork -Trading Guide
30 Jan 2017
Investors rattled by Trump’s curbs - AM Briefing
30 Jan 2017
Dow holds above 20,000 as dollar firms - AM Briefing
27 Jan 2017
Dow breaks above 20,000 - Video Update
26 Jan 2017
Dow at 20,000 boosts risk appetite - AM Briefing
26 Jan 2017
Dow finally breaks 20,000 - PM Bulletin
25 Jan 2017
Wall Street leads stocks higher - AM Briefing
25 Jan 2017
Consolidation continues - Video Update
24 Jan 2017
Dollar recovery helps lift sentiment - AM Briefing
24 Jan 2017
Money management and stop-losses -Trading Guide
23 Jan 2017
Stocks fall on US protectionism fears - AM Briefing
23 Jan 2017
Trump inauguration in focus - AM Briefing
20 Jan 2017
A look-ahead to Trump’s inauguration - Video Update
19 Jan 2017
ECB President Draghi’s press conference in focus - AM Briefing
19 Jan 2017
Dollar steadies after sell-off - Video Update
18 Jan 2017
Equities drift in featureless trade - AM Briefing
18 Jan 2017
Dollar pull-back lifts precious metals- PM Bulletin
17 Jan 2017
Dollar slumps in early trade - AM Briefing
17 Jan 2017
Charting analysis for beginners - Trading Guide
16 Jan 2017
Sterling slumps on “Hard Brexit” concerns - AM Briefing
16 Jan 2017
Earnings in focus - AM Briefing
13 Jan 2017
Fourth quarter earnings in focus - Video Update
12 Jan 2017
Market Info Update: Martin Luther King Day Monday 16th January 2017
12 Jan 2017
Dollar lower as Trump skips stimulus talk - AM Briefing
12 Jan 2017
Trump news conference - Video Update
11 Jan 2017
Trump press conference in focus - AM Briefing
11 Jan 2017
Has gold turned a corner? - PM Bulletin
10 Jan 2017
Another mixed start for Europe - AM Briefing
10 Jan 2017
Trading Psychology - Trading Guides
09 Jan 2017
Sterling slips on "Hard Brexit" fears - AM Briefing
09 Jan 2017
Non-Farm Payrolls in focus - AM Briefing
06 Jan 2017
Non-Farm Payroll look-ahead - Video Update
05 Jan 2017
FOMC minutes viewed as hawkish - AM Briefing
05 Jan 2017
Look-ahead to release of FOMC minutes - Video Update
04 Jan 2017
FOMC minutes in focus - AM Briefing
04 Jan 2017
Strong start to 2017 - PM Bulletin
03 Jan 2017
Equities push higher in first session of 2017 - AM Briefing
03 Jan 2017
Expand 2016 <span class='blogcount'>(483)</span>2016 (483)


Early moves

Dollar falls as Trump disappoints

Precious metals rally

Donald Trump’s first press conference since his election victory was not without incident. Mr Trump took the opportunity to lambast certain sections of the media for their involvement in this latest unedifying brouhaha and thank others for their restraint. He then launched a broadside at the drug industry which led to a sell-off biotechnology and other healthcare stocks before he talked up the progress he’s made in his appointments and business meetings since his election victory in November.

But Mr Trump had nothing to say about tax cuts, reducing regulation or infrastructure spending. This omission led to a sharp sell-off in the US dollar and a corresponding bounce in precious metals.  Gold burst above resistance around $1,190 and is currently settling in above $1,200. Meanwhile the Dollar Index has broken below 101.00 for the first time in a month. The dollar continued its decline overnight and is currently sharply down against all the majors.

European equities and US stock index futures are all on the back foot this morning and there are some investors wondering if the “Trump rally” has run its course. But others will point out that the NASDAQ made a fresh record high last night while other indices remain close to their respective highs. The Dollar Index is still trading above 100 - a level which acted as significant resistance (and now support?) for eighteen months or so. While we could have seen the market top, it’s quite possible that we’re due some consolidation following the sharp post-election rally.

Stock Index Update

Equities rally ahead of Trump news conference

Then fall back after Trump disappoints by omission

European and US stock indices shot higher as the time for Donald Trump’s first news conference since his November election victory drew nearer.  Investors were hoping that it could set up the markets for their next big move, bearing in mind that it was Trump’s acceptance speech back on 9th November that was widely credited for triggering the subsequent equity market rally.

In that, Trump played up his pro-business and pro-growth credentials but made no mention of tariffs, trade barriers or walls with Mexico. Instead, he said now was the time to put aside differences, come together and work to make America great again. This led to a big turn-around in market sentiment. The sell-off in the dollar and stock index futures together with the rally in precious metals which followed early indications that Trump was doing better than expected on election night reversed indecently fast.

The Dow is now around 14% higher than its 9th November low, but has so far failed to break 20,000. The S&P 500 rallied around 12% over the same period. Investors are hoping to see a smooth handover from Fed’s monetary stimulus to Trump’s fiscal stimulus. But there was widespread disappointment that Trump made no mention during yesterday’s news conference of his campaign promises to cut taxes, roll back regulation or boost infrastructure spending. As a result global equities have pulled back from recent highs.

Commodities Update

WTI and Brent rally back following inventory build sell-off

Gold breaks above resistance

Crude oil pushed higher in early trade yesterday after falling sharply on Monday and Tuesday. Both WTI and Brent managed to find some support as buyers returned following the sell-off which saw WTI break below support around $52. The move came ahead of the latest update on US crude inventories and Donald Trump’s first press conference since before his victory in the US Presidential Election. Consequently, it looked less like a conviction move and more like some profit-taking by short-sellers.

Crude gave back all of these gains after the Energy Information Administration (EIA) reported a 4.1 million barrel inventory build for the week ending 6th January. This was way above the 900,000 increase expected. There were also builds in gasoline and distillate inventories. But in a sharp whipsaw move crude subsequently made back all its losses and more. Buyers surged in to drive WTI back above $52 per barrel. This area is pivotal in establishing the next significant move for oil. If it can hold above here going into the weekend then that would suggest further gains are likely - at least from a technical perspective.

Gold and silver were little-moved in early trade yesterday. Both metals appeared to be taking a pause in a rally that began in mid-December. Traders seemed wary of adding to long positions yesterday as the US dollar made modest gains and as gold retested the lower end of a band of resistance which comes in around the $1,190/1,200 area. Gold backed off from here after hitting its highest close since the end of November on Tuesday. The selling subsequently accelerated as the dollar rallied further. But there was a sharp turnaround after Trump’s press conference in which he omitted to expand on his plans for tax cuts and infrastructure spending. This led to a sell-off in the dollar and a sudden surge in gold which took it up above $1,200.

Silver’s gains since mid-December have been steady and measured, and yesterday morning it closed in on resistance around $17. However, it didn’t get an opportunity to fully test this level as it reversed direction midday and then sold off sharply soon after the US open.  Once again, a pick-up in the dollar was the prime trigger although investors were also anxious to cut their overall exposure ahead of Trump’s first news conference as president-elect. Then, as with gold, silver rallied as the dollar sold off. At the time of writing, silver is bumping up against the $17 level.

Forex Update

US dollar rallies ahead of Trump news conference

Then slumps on lack of detail

The US dollar rallied against all the majors yesterday ahead of Donald Trump’s first news conference since last summer. The move saw the greenback recover a fair proportion of its losses since last week after the Dollar Index hit its highest level in 14 years. Investors appeared to be squaring positions ahead of Trump’s appearance before the press. The president-elect has certainly let his views and feelings known through numerous tweets since his election victory. But yesterday was the first opportunity for the press to question him and potentially set the agenda. This worried some market participants who were concerned that Mr Trump ran the risk of getting bogged down with questions over Russia, potential conflicts of interest in his business affairs, his confrontational attitude towards China and Mexico and details surrounding the repeal of Obamacare.

In fact, the main problem was that Trump spent most of his address dealing with press over its handling of the lurid stories about him which apparently emanate from Russia. He then laid into drug companies before talking up his business meetings and appointments made since his election victory. Consequently, there was nothing about his plans for rolling back regulation, cutting taxes and boosting spending. The dollar fell sharply on this lack of news.

Upcoming events

Today’s significant economic events and data releases include Italian Industrial Production, Euro zone Industrial Production and ECB Monetary Policy Meeting Accounts. From the US we have Weekly Jobless Claims, Import Prices and the Federal Budget Balance. There are also speeches from US Federal Reserve members Charles Evans and Patrick Harker.


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Posted by David Morrison

Category: AM Bulletin

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