SOTU non-event, Aussie Swings on RBA

State of the Union speeches can be watersheds in markets as the US president lays out his agenda, but Tuesday's edition left little for markets to digest and instead focused on well-trodden issues like immigration. Some tidbits may later reverberate. The RBA reverted to its old FX rhetorical acrobatics more below). The Dow30 short trade in the Premium Insights was stopped out at 25400, before the market pushed to 25427 and subsequently dropped 100 pts in the futures. The latest Premium video provides suggestions for those who moved their stop (or did not employ any stop). A new trade in commodities was also issued as last night.

One announcement from Trump was a summit with Kim Jong Un in Vietnam Feb 27-28. At times nuclear drama has left a mark on markets and talks are likely to be positive. Yet, the real market mover remains the Trump-Xi encounter, which is likely to take place immediately afterwards. It's not announced yet but the trip along with the timing around the March 1 deadline makes a leaders summit more likely.

On China, there was little new in Trump's speech. He called for a deal that reduces the US trade deficit in a familiar refrain along with comments on protecting IP and US jobs. Trump also called for infrastructure spending (again) in what could be a boost to economic growth. Such calls have been coming for years --if not decades -- and markets aren't going to price in anything until there are concrete steps. Don't forget the increased importance of the fiscal side of the equation as we approach the debt ceiling deadline next month.

More Aussie Swings

The biggest move in markets wasn't on the State of the Union, but RBA governor Lowe's take on the state of interest rates.  He took a clear step into the neutral zone a day after the RBA statement had sent the Aussie higher with a message that wasn't as pessimistic as feared. On Wednesday, Lowe switched to plain English.

"Over the past year, the next-move-is-up scenarios were more likely than the next-move-is-down scenarios. Today, the probabilities appear to be more evenly balanced," he said. AUD/USD dropped to 0.7150 from 0.7240 on the comments and economists have already begun to forecast rate cuts.

Looking ahead, the US continues to catch up on data with November trade balance due at 1330 GMT. It's a stale number but with trade in such flux, it could move markets – particularly any fresh light on US-China trade.