Markets Tread Water ahead of Trump Talk
With the effects of Theresa May’s “ambitious Brexit” comments starting to fade, Sterling entered calmer waters as the Brexit tensions returned to the background. The rise in UK retail sales figures has been attributed to a last minute rush to the tills at Christmas.
UK production, trade balance and the monthly NIESR GDP estimate for September are due out today. If the trade balance figures confirm a substantial widening of the trade deficit, it would be mildly negative for the Pound. The Bank of England’s Governor Carney will also be testifying on financial stability to the Treasury Committee. Headlines revealing another intra-establishment schism regarding Brexit will likely be bad news for Sterling.
GBPUSD hovered between 1.2100 and 1.2200 for most yesterday with only sentiment to drive the price. The latest strength in the US Dollar versus its main competitors is due to renewed buying interest in US treasury bonds, instigated by rising inflation expectations amid higher fiscal spending.
President-elect Donald Trump will conduct his first news conference (excluding Twitter outbursts) since his election win later tonight. The markets’ will be interested to see if any light will be shed on anti-globalisation and protectionist policies becoming a reality. If Trump focusses on the growth agenda (tax reform and deregulation), while steering away from talk of a border tax as well as conflicts of interest and foreign affairs, the markets are likely to react positively.
There was no Eurozone economic data of note yesterday. However, recent data has triggered speculation that the European Central Bank (ECB) bond purchases will be tapered during 2017, especially as there is the potential for increasing opposition to quantitative easing from the German Bundesbank. The latest German bond auction will be watched closely today to assess whether bond demand has weakened due to inflation concerns.
Data to Watch: 9:30am UK Manufacturing Production (YoY)(Nov); Industrial Production (MoM)(Nov); UK Manufacturing Production (MoM)(Nov); UK Industrial Production (YoY)(Nov); 3pm UK NIESR GDP Estimate (3M)(Dec); 3.30pm US EIA Crude Oil Stocks Change; 4pm US Donald Trump’s News Conference; 6pm US 10-Year Note Auction.