Asian markets rise, dollar holds gains ahead of Trump speech

Beefing up immigration control, destroying the Islamic State and revamping the tax code are likely to be the main focus areas of Trump's first speech to the joint session of Congress.

"We are concerned that the markets could be heading for a harsh reality check if the Trump administration fails to meet high expectations as reflected in strong equity gains, including risky assets", Piotr Matys, currency strategist at Rabobank in London, wrote in a note to clients.

The dollar index opened in Asia marginally higher than yesterday's close after hawkish comments from FOMC member Rob Kaplan helped underpin the greenback.

USA economic data released on Tuesday showed a moderate growth path under the Trump administration, as the US economy expanded at a slower pace in the fourth quarter, in line with last month's estimate. The Canadian dollar declined against its U.S. counterpart on Tuesday as the dollar firmed, while investors awaited a speech from U.S. President Donald Trump and the Bank of Canada's interest rate decision on Wednesday.

In commodities, oil prices inched higher as supply cuts by the Organization of Petroleum Exporting Countries offset concerns about rising US crude inventories.

"Before Trump's speech, investors were reluctant to fully price in the increased possibilities of a March rate hike". It hit session high at 0.7694 and made session lows at 0.7655 levels. Investors will also prepared for private sector manufacturing data from around the Eurozone and flash inflation estimates from Germany later in the session.

"President Trump's big address naturally has attracted a lot of anticipation in markets".

The Stoxx Europe 600 Index added 0.2 percent after four straight days of losses.

Stocks in Asia were mixed overnight, with the surging USA dollar supporting gains for the Nikkei 225, which rose 1.44% to close at 19,393.54 points.

Japan's Nikkei jumped 0.5 percent, buoyed by a weaker yen and data showing manufacturing activity expanded in February at the fastest pace in nearly three years.

Spot gold XAU= turned down 0.1 percent to $1,255.22 an ounce by 2:43 p.m. EST (1943 GMT), after rising to $1,263.80, the highest since November 11, but prices failed to hold above the 200-day moving average at $1,260.74.

"There is setting up for what people expect might be at least a focus on things like fiscal stimulus and infrastructure spending of some kind, that might actually boost risk and cause yields to rise", said Aaron Kohli, an interest rate strategist at BMO Capital Markets in NY. It is on track to end February with a gain of around 1.5 percent.

  • Zachary Reyes