Higher Open For US Markets on Oil rebound

There you have it, investors have shown some of their concerns if Donald Trump will be successful in getting his fiscal spending and trade tariff approved in congress. This has caused a reversal in the most famous trade, which we had since he has won the election. The dollar index has eased off and treasury yields have reversed their direction. Since the election results, we have seen major losses for bonds and investors have piled their bets in equities and commodities such as iron ore and copper.

Nonetheless, we had another record high yesterday for the Dow Jones index and the futures are trading mildly higher. It is the bounce in oil prices, which is causing this move. The speculators are once again considering the recent sell off as an opportunity. If you look at the US oil fund, you will note that we had some traders coming into the market and building their positions again.

Of course, the bet is that OPEC will be able to address the supply issue and that could push the price higher. This will be a very important strategy for the cartel. They surely do not have time on their side because with Trump in the president's office, the support for US shale oil will increase. Although, the Trump fiscal spending through Trumpnomics may be able to suck that extra supply and we may not have to be worried about that extra supply which is pushing the price of oil lower along with higher dollar.

Investors will remain busy in chasing the current trade. However, the strength in the equity market, is not across the board, as we can see both the S&P500 and the Nasdaq index has started to lose steam. The NASDAQ index especially is very much dependent on trade deals and if Mr. Trump does introduce some strong trade tariffs, which has had talked about, they are going to impact the silicon valley's firms.

The fact is that the US needs China more rather than the other way around. Trade tariffs is going to make the positions of US competitors a lot more stronger, and thus it will hurt the US GDP in the long run. Hence, this is why previous presidents have taken a very soft stance towards this matter.

The US economic data released today has painted a better picture for the US economy. Most of the strength was in the US retail sales data which came on the heels of higher wage growth. The dollar has ticked higher and further away from its day's low.

The December interest rate hike is very much a done deal now and what matter the most for us is to listen to the Fed statement carefully (in December )as this will provide enough clues for future interest rate hike trajectory.

Three of the Fed voting members will also be speaking later today and w are expecting a message which will pave the path for a rate hike in December. After their comments, we could expect the profit taking for the dollar index to fade further and the rally may continue towards the upside.

Earlier today, we had the UK's CPI y/y data which fell short of forecast. Since Brexit, inflation has been the chief concern for the BOE and today's number has faded some of that anxiety.

Another important reading, which was released earlier today was the German ZEW economic sentiment number. The Euro has been under immense pressure against the dollar, and it is likely that we may see the low of 1.0524 in the coming weeks if not days.

But if we are going to break the dollar parity, we do not anticipate that. The reason being, it is almost time for the ECB, to start scaling back on their QE program and let the fiscal policies carry the rest of the weight

© Scoop Media