By Margaret Yang, CMC Markets
The US dollar Index rebounded more than 1% overnight, as the Federal Reserve’s chairperson Yellen hinted that the Fed is close to achieving its goals of full employment and moderate inflation target. This led the market to believe that more rate hikes are on the table this year, which outweighed the impact of Trump’s comments on a “strong USD” earlier this week.
US earnings season kicked off with positive surprises, especially from the financial sector. Morgan Stanley, Citigroup, Goldman Sachs and Netflix have all reported higher than expected fourth quarter earnings, with strong growth in fixed income and trading activities. The financial sector fueled the rally of US indices last night, although the magnitude was very small.
US markets have risen too fast and too far on optimism surrounding the changes that the new government may bring to the stock markets. However, this rally has rendered indices vulnerable towards big downsides if Trump’s earlier promises become empty talk.
USD/JPY rebounded over 1.8% since last night, sending Japanese equities higher this morning. The other Asian markets, however, have entered into consolidation phase as traders and investors take less risk ahead of Trump’s inauguration speech later this week.
Margaret Yang Yan, CFA, is a market analyst for CMC Markets Singapore