US Futures Higher Ahead Of Economic Data

  • ECB minutes ignites euro rally
  • Bitcoin dances to South Korean regulation update 
  • Chinese exports strong while imports stall

European markets and US features a trading higher today. Investors over in the US decided that one-day sell-off is all the opportunity they are going to get, given the history of record highs in the stock market, and decided to not only jump back in but pushed the US markets to another record high. The concerns over Trump walking away from NAFTA deal has lost some steam. The reality is that even if Trump walks away from the deal, the Congress has the power to create many obstacles and stopping the distraction of the deal. I would not be surprised if Trump actually tries to do something which he did with the Paris Accord; first walk away and then open the door for new negotiations for the same deal.

Traders have decided not to overemphasise their concerns about the monetary policy. The hawkish stance by the president of the European Central Bank, Mario Draghi, made investors a little concerned, hence we had witnessed weakness in the European equity markets yesterday. But the bigger picture which investors should not ignore is that the bank is taking the right step and at right time. The foundation of the Eurozone has become much more solid, the unemployment rate has improved, inflation is moving in a more favourable direction and the business confidence has strengthened. There is little or no reason for the bank to keep the liquidity taps running at the ultra-loose rate. Perhaps, the strength in the Euro could have an effect on the region's economy, but if we have learned anything from the monetary policy tightening experience, it is this; central banks still have the ability to put a leash on the currencies. A perfect example would be that the Fed is increasing the interest rate and yet the dollar is getting slammed.

The Eurozone’s core CPI number has slipped back below 1% and the latest US PPI number has also seen a surprising fall from it’s previous reading of 3% to 2.6%.  The upcoming US CPI number is an important gauge for traders today, because if it echoes the same message, it would puzzle Investors about the likely pace of US interest rate rises this year. An economic data that stands taller among other today is the US retail sales number for December. We have seen a strong performance during the month of November (0.8%)- thanks to the Black Friday event. We need to see strong colours of Christmas in today’s number, the gradual increase in the wage growth over in the US should help to beat the market consensus of 0.5%. The dollar index lost it’s momentum and any strength in the US retail sales number could perhaps provide some tailwind for it.

South Korea is making a mockery itself when it comes to making an announcement around cryptocurrency. The finance minister of the country decided that banning the cryptocurrency would require more coordination among ministers. Of course, he is right this time as we said yesterday; it would require a backing of 297 members of the National Assembly for this to become a reality. I think the best practice for the ministers in South Korea would be to sit down together first, see what is the common view among most peers, and then carefully prepare the statement which could actually become a reality rather than walking around like headless chickens.  Even if the only motive is to reduce the premium on Bitcoin price relative to other exchanges, they are not doing a great job.