Article Highlights

  • Trump backpedals on “phenomenal” tax plan announcement
  • Trump: No tax reform will be made until Obamacare replacement is proposed
  • Trump: “Big announcement on infrastructure” on Tuesday
  • FOMC voting member Kaplan: Rates should be raised sooner rather than later
  • U.S. headline durable goods orders up 1.8% vs. 1.6% forecast
  • U.S. core durable goods orders down 0.2% vs. projected 0.5% gain
  • U.S. pending home sales slumped 2.8% vs. estimated 1.1% increase
  • New Zealand trade deficit widened from 36M NZD to 285M NZD
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Contrary to his promise of a “phenomenal” announcement on taxes, U.S. President Trump downplayed expectations for his Tuesday speech. A couple of data misses also dampened the dollar’s spirits, but not for long.

Major Events:

Trump’s pre-game for his Tuesday announcement – Forex junkies had been getting their hopes up for a YUUUGE announcement from The Donald on Tuesday, but the U.S. President admitted in his pre-announcement speech that no changes on taxes will be made until a proposal to replace Obamacare is made. In other words, watching replays of the Oscars and the Big Picture announcement blunder could be more entertaining!

According to Trump, he’s still gearing up to make a “big announcement on infrastructure” during his speech in front of the joint session of Congress this week. He added that the administration’s budget will also focus on public safety and that he plans to increase security spending.

FOMC voting member Kaplan’s speech – Reiterating some of his previous remarks, Dallas Fed President Kaplan stepped up to the podium once more to point out that interest rates should be hiked sooner rather than later. He expressed confidence that the U.S. economy can exceed 2% GDP growth this year and that it is getting closer to achieving inflation and employment targets.

However, Kaplan also noted that there is still some degree of labor market slack and that the participation rate is likely to slide within the decade, which means that the U.S. needs to invest in its workforce development and education. He concluded that hiking rates a few times this year would still keep monetary policy accommodative enough but keep the Fed from falling behind the curve.

Mixed U.S. economic data – The numbers are in and the winner is… La La Land! Just kidding. Uncle Sam wasn’t such a big winner in the latest New York session as its durable goods orders report printed mixed results, with the headline figure posting a stronger than expected 1.8% gain versus the 1.6% consensus and the core reading showing a surprise 0.2% drop instead of the projected 0.5% uptick.

Components of the report revealed that orders for military capital goods excluding aircraft suffered a 0.4% dip, erasing part of the 1.1% increase seen in the earlier month. Still, orders for capital equipment posted a gain of 8.9% year-over-year, which is its fastest pace of increase since January 2014. Analysts pointed out that businesses may be ramping up investment activity on expectations of tax reform and deregulation.

Meanwhile, pending home sales slumped by 2.8% instead of rising by 1.1% in January. To top it off, the February reading was cut in half from the initially reported 1.8% increase to just a meager 0.6% uptick. According to the National Association of Realtors, this was mostly due to a significant shortage of listings during the month, along with deteriorating affordability on higher home prices and mortgage rates.

Major Market Movers:

USD –  The Greenback initially slumped upon seeing downbeat readings and hearing about Trump’s not-so-phenomenal announcement, but it was able to stage a rebound towards the end of the session.

USD/JPY dropped from a high of 112.49 to a low of 111.93 then recovered to 112.73, EUR/USD rose to a high of 1.0631 then retreated to 1.0580, GBP/USD reached 1.2480 then turned back down to 1.2430, and USD/CHF bounced off a low of 1.0071 to 1.0090.

Watch Out For:

  • 11:50 pm GMT: Japanese preliminary industrial production (0.4% expected, 0.7% previous)
  • 11:50 pm GMT:  Japanese retail sales y/y (0.9% expected, 0.7% previous)
  • 12:30 am GMT: Australian current account balance (-3.8B AUD expected, -10.2B AUD previous)
  • 5:00 am GMT: Japanese housing starts (3.3% expected, 3.9% previous)

See also:

London Session Recap

Asian Session Recap

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