By John Acher

Financial markets are showing some signs that the "Trump trade" could be recovering, including some slippage in the price of safe-haven gold, as investors look for potential new opportunities if the Trump administration's plans for tax cuts, infrastructure spending and capital repatriation get back on the agenda.

The "Trump trade" is the name given to the bump in markets after the surprise November 2016 election of Donald Trump as US president. It was driven by hopes in the financial markets for tax cuts and bonanza in infrastructure outlays, which all but vanished once the Trump administration proved incapable of passing key legislation.

One sign of the incipient optimism about a revival of the Trump trade is the somewhat firmer US dollar, as seen in EURUSD correcting a bit lower.

“We have seen a bit of dollar firming. You could say that this is simply a consolidation after a brutal run lower,” says Hardy. (Read also Hardy's latest FX Update here on TradingFloor.)

“But there is a lot on the fundamental front going on after a disastrous few weeks of the US president’s behaviour and thoughts of impeachment etcetera,” says Hardy. “He seems to have turned some kind of corner, and this deal-making with the Democrats is a rather new angle.”

“It suggests that we could see at least a shadolw of the Trump trade returning, tax reform and so forth, as he appears willing to deal with the Democrats, and this is an interesting turn and unexpected,” Hardy says.  

Trump struck a deal with the Democrats last week on a short-term plan to fund the government and raise its borrowing limit this month, which came as a surprise even to congressional Republicans.

"So this could provide some relief for some time for the dollar if we see it developing in the weeks to come," Hardy says.

The firmer dollar and emerging optimism about the Trump trade are affecting other assets.

"Gold is where the Trump trade is coming back,” says Saxo Bank's head of commodities strategy Ole Hansen.

Gold prices have traced a bit lower, and $1,300/oz is the key level to watch out for, Hansen says.

The Bank of England’s policymakers meet on Thursday, with their announcement due at 1100 GMT.

The August BoE statement said that the bank is willing ignore some high and uncomfortable inflation for now.

The BoE is going to reassess things after the October economic data, which won’t even be available until November, says Hardy.

“I have my questions whether the market’s recent enthusiasm for buying sterling – the squeeze here – is going to find encouragement in anything they say,” says Hardy. “But, of course, if they do say something that shifts or underlines or even encourages the further upgrade of the rate view that could be more supportive for sterling – I am just totally sceptical.”

GBPUSD has regained local highs above the previous 1.32-plus area that was rejected.

“I suspect that we will remain rangebound, and if we do see upside, I think it will fall short of the 1.35 area,” Hardy says.

August CPI data is due from the US today, and will be closely examined as input for next week’s (September 20) Federal Open Market Committee meeting.

“Everyone is very much in deflation mode, so anything to the upside is probably the bigger surprise scenario,” Hardy says.

“Equities will likely fade today. We have seen some impressive gains,” says Saxo Bank's equities strategy chief Peter Garnry, adding that he finds it puzzling that the strong euro has not had a deeper effect yet on European share prices.

The 12,500 level in Germany's Dax is a critical level and a "potential attacking angle" for traders, Garnry says.

"Watch the financials, they could be the driver of a slip in equities," says Garnry, noting that reinsurer Munich Re said that hurricanes Harvey and Irma may wipe out third-quarter net income. 

Oil prices got a lift from upbeat messages about the supply-and-demand outlook from the International Energy Agency and Opec this week.

The overhang of oil supply after disruptions is being offset by robust and rising refinery demand (on raised margins) and rising second-half demand growth, says Hansen.

WTI crude oil is now challenging downtrend from February ahead of the August peak at $50.50/barrel, Hansen says.