Trump May be good for Brexit?
The government published its Article 50 legislation yesterday in a mere 137 words, although the overall impact was limited. The markets were somewhat distracted by Theresa May’s first meeting with President Trump in the White House today. There were ‘nervous’ comments from EU officials stressing that EU members can only discuss trade deals as a part of the bloc. The US and UK laying the groundwork for a trade agreement might give the UK leverage in Brexit negotiations.
UK GDP data for the fourth quarter of 2016 beat economists’ projections of a post-Brexit era with 0.6% growth. GDP growth for 2016 as a whole slowed to 2.0% from 2.2% in 2015. Growth was again dominated by services, although there was a positive contribution from manufacturing.
The BBA mortgage approvals data was stronger than expected. However, there was a weaker reading for the CBI retail sales survey at -8 for January from 35 the previous month, with a sharp dip in sales at grocers. Sterling retreated in the early hours of this morning with a decline to below 1.2550 against the Dollar as the Euro rallied back below 1.1760.
US jobless claims unexpectedly rose to 259,000 in the latest week from 237,000 previously which still suggests a strong labour market. The December goods trade deficit declined to US$65.0bn from US$65.3bn in November with a small increase in exports for the month. The data was overshadowed by President Trump’s threat to impose import taxes.
The US PMI services sector index was stronger than expected at a 14-month high of 55.1, compared to the previous month’s 53.9, with business optimism at its highest level for two years. There was, however, a weaker than expected reading for new home sales with a 10.4% monthly decline which increased speculation that higher mortgage rates had undermined sales.
German Bundesbank head Weidmann stated that the Eurozone economic outlook is quite positive and that inflation should meet the European Central Bank’s target by 2019.
Data to watch: 1.30pm US Q4 Gross Domestic Product, Index & Annualized. Q4 Personal Consumption Expenditures & Core PCE. December Durable Good Orders & DGO excl. Transportation.