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US to benefit from Trump’s tax expertise

US to benefit from Trump’s tax expertise

The Bank of England revealed that the outgoing Deputy Governor Minouche Shafik would be replaced by Charlotte Hogg before March’s Monetary Policy Committee (MPC) meeting. It was also announced that Kristin Forbes will be stepping down at the end of June. Forbes has been one of the more hawkish MPC members and her departure could further reduce any hawkish influence within the MPC.

Despite a fall in German exports for December, there were concerns that 2016’s record trade surplus would antagonise the Trump Administration and promote calls for a stronger Euro. The Euro was unable to gain any traction above 1.0700 against the Dollar yesterday.

President Donald Trump also kept media outlets interested as usual and woke markets across the globe in what has been a quiet week for the US Dollar. In his meeting with airline CEOs, Trump revealed that “we are going to be announcing something over the next two or three weeks that will be phenomenal in terms of tax!”. Following this, USD strengthened against major currencies with the Dollar index, a measure of the value of the United States Dollar relative to a basket of foreign currencies, increased by 0.4%.

St Louis Fed President Bullard stated that he didn’t believe that the US economy would overheat during 2017 as inflationary pressures wouldn’t last, especially as any fiscal changes would not impact until 2018 or 2019. Overall, he expected one rate increase would suffice in 2017 and that the Fed could shrink the balance sheet as an alternative to raising rates over the medium term.

Data to watch: 9.30am UK Manufacturing Production & Industrial Production, Year on Year & Month on Month. Trade Balance, Total Trade Balance & Goods Trade Balance. 10am German Buba Weismann Speech. 1.30pm US Import & Export Price Indices 3pm UK NIESR GDP Estimate. 6pm Baker Hughes Oil Rig Count. 7pm Monthly Budget Statement.

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