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Donald Trump’s Speech To Congress Today Will Be Monitored Closely

Market movers today

Donald Trump’s speech to Congress today will be monitored closely, as a few weeks ago he promised that he would announce ‘something phenomenal in terms of tax’. His speech has potential ramifications across both rates, FX and commodity markets.

In the Scandies, we will see Danish Q4 preliminary GDP growth today. In mid-February, Statistics Denmark’s GDP indicator showed healthy growth of 0.4% q/q. Swedish Q4 GDP data is also on the calendar for today. We estimate an outcome around or a little above 2% y/y in calendar-adjusted terms.

Selected market news

Overnight, industrial production figures in Japan were published. In January, industrial production fell 0.8% m/m, while consensus was for it to grow 0.4% m/m. That ends a five-month streak of increases. Although one should not over interpret one observation, it does point to slow growing evidence that the global industrial cycle could be nearing a peak.

Yesterday, US President Trump said he would talk about his budget in his address to congress later today. Earlier he has said he would announce something spectacular in terms of taxes. In a series of tweets he hinted further that he would also address the issue of public infrastructure spending. His speech today could potentially have implications across markets. A big announcement on fiscal policy could refuel the reflation theme, which has lost a bit of momentum recently. If that includes spending on infrastructure, it is likely to have ramifications for base metal prices. Finally, if he mentions a border adjustment tax it would have implications for USD. Markets are likely to be hesitant ahead of the speech tonight.

There has been some speculation over whether Scotland would be allowed a second referendum on independence following a UK withdrawal of EU membership. Yesterday, UK Prime Minister Theresa May was clear there should be no second referendum. Nevertheless, the renewed speculation of an independence vote weighed on GBP yesterday.

Iran expressed some satisfaction with overall OPEC compliance to cuts implemented from 1 January. Furthermore, Iran said it is too soon to talk about extending a deal to cut oil output in the second half this year. Iran thus seems to join the apparent consensus within OPEC, hesitant over the prospect of extending output cuts another six months.

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