Trump’s immigration policies don’t travel well
The UK economy grew by 0.6% in the last quarter of 2016, beating expectations of a 0.5% advance, even accelerating in the second half of the year when compared to the first half. After rallying to a fresh monthly high of 1.2670, GBPUSD retreated at the end of last week, despite resilient UK economic data.
The Bank of England will have a monetary policy meeting and inflation report this week. Despite inflation rising this year the market believes it is too early for Mark Carney to amend monetary policy. There was a relatively favourable response to Prime Minister May’s meeting with President Trump, although the market impact was overshadowed by escalating protests surrounding US travel restrictions.
Eurozone money supply growth was slightly stronger than expected with German import prices rising more than predicted, although there was little market impact. Today’s Euro data highlight will be the German inflation data.
The Eurogroup failed to reach agreement on Greece which triggered fresh concerns over a “Grexit”. The IMF has drafted a report ahead of their meeting with Greece stating that Greece’s public debt and financing needs will prove “explosive” in decades to come unless Europe overhauls its bailout program to ease the load.
Friday’s US fourth quarter GDP data printed below consensus at 1.9%, down from 3.5% in Q3. Consumer spending held steady and investment rose, but net exports fell, which will tend to inflame trade tensions. The 1.6% GDP growth for 2016 as a whole was the weakest growth rate since 2011.
Headline Durable Goods Orders were significantly weaker than expected with a 0.4% decline following the previous month’s 4.8%, although the underlying data met expectations with a 0.5% gain and a strengthening in capital goods orders. The revised University of Michigan consumer confidence index strengthened to its highest level for 13 years.
Data to watch: 10am Euro Consumer & Industrial Confidence, Services Sentiment, Business Climate. Economic Sentiment Indicator. 1pm EUR German Consumer Price Index & Harmonised CPI. 1.30pm US Personal Consumption Expenditures & Core PCE. Personal Income & Personal Spending. 3pm Pending Home Sales.