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May confident of “Ambitious Brexit” and BoJo meets Trump advisers

May confident of “Ambitious Brexit” and BoJo meets Trump advisers

Yesterday the British Foreign Secretary, Boris Johnson, commented that Britain is “first in line” for a trade deal with the US. After talks with Donald Trump’s senior advisers, Mr. Johnson explained “one thing that won’t change though is the closeness of the relationship between the US and the UK.” Boris was unable to positively affect the Pound with his comments. Meanwhile, Theresa May has attempted to add to the Brexit nomenclature by replacing hard and soft Brexit with “Ambitious Brexit”.

UK house prices for December revealed a 6.5% gain on an annualised basis and the December BRC retail sales report recorded a 1.0% increase in like-for-like annual sales. Sterling was still unable to gain any support and held near 1.2150 against the Dollar and also declined to eight-week lows of around 1.1450 against the Euro.

Eurozone unemployment was unchanged at 9.8% for November, but the Italian unemployment rate increased to 11.9% from 11.8%, further increasing concerns surrounding Italy’s structural outlook. The Eurozone Sentix investor confidence index strengthened to 18.2 from 10.0 previously, although the overall impact was limited.

Record highs for German imports and exports are fuelling speculation that the German economy is overheating. The seasonally-adjusted German trade surplus increased to EUR 21.7bn from the previous month’s EUR 20.6bn. There was also speculation that the European Central Bank (ECB) would need to tighten policy within the next few months, especially with Bundesbank opposition to the bond-buying programme likely to increase.

There were more Fed Presidents speaking yesterday. The Boston Fed’s Rosengren maintained his call for a further gradual tightening of monetary policy with higher interest rates, needed to lessen the risk of overheating, and a sharper increase in inflation. Atlanta Fed President Lockhart suggested that at least two rate increases were realistic for 2017.

President-elect Trump will be giving a press conference on Wednesday and the political uncertainty has triggered caution. Although the markets will clamour for more details of impending tax cuts, it is likely that favourable Dollar developments have been priced in already.

Data to watch: 3pm US JOLTS Job Openings & Wholesale Inventories.

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