U.S. equity markets posted their biggest one-day loss since August 2017 with the Dow dropping 362 points and the S&P 500 losing 31.10, both over the 1% mark. The fall came just hours before the President gave his State of the Union speech on Capitol Hill and hailed the strength of the U.S. economy, the strength of the stock market and the continued trend of job creation. Crude oil markets also fell lower on the session, dragging lower the commodity-based currencies.

Overnight in the United States, President Trump outlined his plans for the United States in his speech, where he called on Democrats and Republicans to work together on immigration and infrastructure. Stating he wanted Congress to pass legislation that will create $1.5 trillion of infrastructure investment. To be frank, the markets didn’t care about the speech, but this could of gone either way. This was Donald Trump after all, and it depended on which version of the President turned up. But this was the State of the Union, a huge occasion on the political calendar, and to go in underprepared and off the cuff would have been, even for this President, a foolish move.

At the end of the speech and the subsequent replies, the markets were little changed. Of course, stock markets were closed, but the dollar had shrugged off the pat on the back Trump gave himself over the economy, and instead chose to focus on the Fed and macro data during Wednesday’s session. 

After last week’s European Central Bank and Bank of Japan announcements, today’s is the turn of the Fed, at what is Janet Yellen’s last as Chair. Her last hurrah is likely to be a fairly simple one with probability for today’s FOMC sitting at 96.2% chance of no change in rates. Tonight also only sees a statement from the Fed and no press conference, so it’s likely we will see very little change from the December statement. We look towards any outlook points, as it is expected that the Fed will raise at the March meeting, which will be Jerome Powell’s first as Chair. 
 

EZ CPI/US ADP

Today also sees the ADP payroll number, expectations are for 185,000 with a move away from that figure could well having a knock-on effect on the dollar. The dollar has found some bids so far this morning and is pushing higher against the Pound and the Euro initially, however slightly stronger Eurozone CPI data and in line unemployment readings. The better than expected CPI would raise further questions about the pace of QE from the ECB, has it done its job, and should the reduction and withdrawal begin.