Trumpenomics fails to get a look in
The UK’s trade deficit rose more than expected, negating the positive impact of strong growth in manufacturing and industrial production. The Office for National Statistics (ONS) revealed that the volume of goods exported rose at a three-month rate of 1.1%, up from the previous report which showed a 2.7% decline. Economists suggest that the weak Pound is fuelling increased exports and consequently increased manufacturing. However, the weak Pound has also increased the cost of imported goods already on order e.g. laptops and tablets.
Mark Carney’s testimony to the Treasury Select Committee provided little respite for the Pound, which was weighed down by the disappointing UK trade balance data. Carney also hinted at raising economic forecasts again and recommended a transitional deal for quitting the EU. Furthermore, he opined that Brexit posed a greater risk to the remaining members of the EU than the UK. The Pound continues to remain under some pressure due to ongoing anxiety related to the Brexit process and the impending Supreme Court ruling.
The lack of US economic data amplified anticipation of Trump’s first (non-Twitter based) press conference. The bullish mood built as investors awaited insight on taxes, deregulation and fiscal stimulus. Trump did not touch on these subjects, disappointing the Dollar bulls. Treasury yields dropped and USD was aggressively sold off. The Dollar had risen to 1.2053 against the Pound, but by the time Trump was done the Pound had climbed to 1.2243 against the US currency.
Today’s calendar has the first estimate of German 2016 GDP, predicted to have increased since 2015. The numbers will confirm that Germany is on a solid growth path, and confidence indicators suggest that this will remain the case in the first quarter of this year. The calendar also has Eurozone production data for November and the European Central Bank’s (ECB) minutes for the December meeting.
Data to watch: 10am EUR Industrial Production. 12.30pm EUR ECB Monetary Policy Meeting Accounts. 1.30pm US Initial Jobless Claims. 7pm US Monthly Budget Statement.