On Tuesday night, President Trump will deliver what is technically his first State of the Union address. The White House has offered few details about what policies the president plans to roll out, Democrats are packing the audience with various people Trump wronged or insulted, and the First Lady is said to be miffed at her husband over reports that he had an affair with a porn star. Could be lively!
There are 5 main topics of the state of the union this year and one of them is the economy, to which he is likely to elude to the weak US dollar, and probably talk it up some more. This would obviously be a key development and drive dollar pairs overnight, also, this is Trump, so you can’t legislate for him going off the cuff and saying something that could well cause a stir. The image below charts the Dow, S&P, GDP and unemployment rate since the 9/11/2016 election day. It obviously gives Trump a lot to shout about when discussing the administrations success on the economy jobs and stock market.
The overall official theme of the speech is “building safe, strong and proud America” with the economy, immigration, trade and national security all having the potential to move markets. Trump will give himself and his administration a huge pat on the back for the strength of the economy, and of course the rally in the stock markets. He mentioned this 7 times in his Q&A in Davos, as well as multiple times in his interview on UK TV.
Immigration is the next big battleground that he will speak about, and of course, we must also remember that it’s a key topic when looking at keeping funding going and avoiding another government shutdown in a week or so. Trump mentioned on Monday that he is ready to nudge Congress on an immigration compromise, and it has to be bipartisan as the Republicans do not have the votes alone to push anything through.
Other officials have given very little away about the speech, but have said that we can expect it to be upbeat and have an optimistic tone, which could buoy markets, push futures higher and help the dollar.
The other angle on the SOTU is the fact that it is a political event, and usually the markets will shrug off a political speech or event. However this is Trump, and how much the markets care about tonight’s address will be down to which Donald J Trump turns up. If it’s the Presidential Trump we saw at Davos then we could be in for a fairly quiet affair for the markets, however a ranting of message and clearly of script Trump has the ability to cause a stir.
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