Dollar strengthens ahead of Donald Trump press conference

Brexit woes cause sterling to decline but industrial commodity prices hold recent gains

The dollar strengthens but sterling falls and the Turkish lira is under the cosh. Photograph: Jason Lee/Reuters

The dollar strengthens but sterling falls and the Turkish lira is under the cosh. Photograph: Jason Lee/Reuters

 

European stocks and US index futures are mixed at lunchtime, while Treasury yields see minimal moves, as traders appear wary of making bold bets ahead of a press conference later in the day from US president-elect Donald Trump.

The dollar is stronger, with sterling under pressure and the Turkish lira at another record low. Industrial commodity prices mostly are holding recent gains.

Metal prices are on a good run, underpinned by hopes for sturdy demand amid expectations of a US infrastructure boost and after data showing stronger-than-expected China producer price inflation.

Copper on Tuesday hit a three-month high and China-traded iron ore futures are up nearly 10 per cent already this week.

With gold also on the front foot of late, global mining stocks have jumped. And that trend, along with the pound flirting with 31-year lows versus the dollar, has been an important cause of London’s FTSE 100 delivering a record breaking rally.

On Wednesday, the Footsie is adding 0.1 per cent to 7,284 as sterling falls again on Brexit worries, leaving the blue-chip benchmark in line to for a 12-day winning streak, its best ever run, according to Reuters.

However, the bounce sees the Footsie sporting a 14-day relative strength index – a closely watched momentum gauge – of 81.3. That’s well above the “overbought” threshold of 70, an indicator that may make some more technically-minded traders a bit nervous.

Highlight of the trading day is likely to be Mr Trump’s press conference, due to start at 4pm.

Investors will be keen to hear what he has to say about his plans for tax reform, trade, international relationships and a mooted infrastructure boost.

The Mexican peso will be in the spotlight should Mr Trump expand on the US’s trade relationship with its southern neighbour.

The peso is down 0.3 per cent to a record low of 21.8684 per dollar early as Mr Trump’s protectionist policies are considered harmful to Mexico’s economy.

Political outlook

Another currency under the cosh is the Turkish lira, which is sliding 2.4 per cent to a record low of 3.8820 versus the buck as investors continue to fret over the country’s economic and political outlook.

The dollar index is up 0.5 per cent to 102.47, holding less than 1.5 per cent shy of the 14-year high touched last week as the euro slips 0.4 per cent to $1.0513.

Sterling is down 0.4 per cent to $1.2124 ahead of Bank of England governor Mark Carney’s appearance before a parliamentary committee on Wednesday, and after poor trade data. The Japanese yen is 0.3 per cent softer at ¥116.10 per dollar.

Moves are mild ahead of the Trump press conference and as investors await a bunch of US bank earnings reports later in the week.

The pan-European Stoxx 600 is up 0.2 per cent as energy shares reverse initial losses, while US index futures suggest the S&P 500 will ease just two points to 2,267.

In Asia, Japan’s Topix gained 0.5 per cent as a weakening yen took some pressure off exporters.

Greater China bourses were mixed, with Hong Kong’s Hang Seng adding 0.8 per cent but the mainland’s Shanghai Composite down 0.8 per cent, as investors worried that a rush of IPO approvals would increase equity supply.

Investors

Brent crude, the international benchmark, is up 0.4 per cent to $53.97 a barrel, while West Texas Intermediate is gaining 0.3 per cent to $50.98.

Prices fell a cumulative 6.1 per cent over the previous two sessions as investors worried that a rising US rig count could offset imminent production cuts by Opec and other major producers.

Gold is up $1.5 to $1,189 an ounce, after notching a back-to-back rise on Tuesday and enjoying solid gains over the past fortnight.

Action is muted, in keeping with the broader market’s tentative tone.

The 10-year Treasury yield, which moves inversely to the bond price, is up one basis point to 2.38 per cent.

Equivalent maturity German Bunds are retreating by 2bp to 0.26 per cent.

– (Copyright The Financial Times Limited 2017)