Trump and May push for boost to domestic production

Most of Wise Money’s focus was the lead up to Donald Trump’s inauguration, and Theresa May and Donald Trump hold face-to-face talks today.

Most of Wise Money's focus was the lead up to Donald Trump's inauguration, and Theresa May and Donald Trump hold face-to-face talks today

By Davide Ugolini, Senior Corporate Dealer

The White House readies itself to welcome UK Prime Minister Theresa May today. She is the first leader to meet the new US president, and there is already a lot of anticipation and contrasting views in the media on the meeting. Mrs May is ambitious, and wants to try and secure a free trade deal with the US, post-Brexit. This is a very early meeting where nothing will be set in stone, but it will be nonetheless interesting to hear from the two leaders.

Market news

Over to the markets, yesterday we learnt that in the UK, strong consumer spending has supported growth over the past three months and this has helped the UK to grow at the end of 2016, beating the dampening impact of the Brexit vote.

The services sector continues to be the driving force behind the UK economy in recent quarters, but many analysts are still worried that 2017 will be a more testing year for the UK economy as consumer spending is likely to be squeezed by rising inflation. Nonetheless, the data yesterday was very encouraging, as the UK was again the fastest growing G7 economy in 2016, with GDP growing by 0.6% quarter on quarter in the final three months of the year.

Over in Germany, the GFK consumer confidence reading for February improved more than expected, printing 10.2 against an expected 10.

In the US the day was busy, with flash PMIs for January beating expectations and improving month on month to 55.1 against an expected 54.4. Labour market data was slightly disappointing, with initial jobless claims rising more than expected to 259k. New home sales for December also disappointed at 536k, against a market expectation of 588k.

Data to come

Looking at todayís calendar we start in Europe, with December M3 money supply numbers and January consumer confidence out in France.

In the US, Q4 GDP are scheduled for release, together with preliminary data on durable and capital goods orders in December. The last piece of data will be the final University of Michigan sentiment reading for January. All in all it will be a fairly busy end to the week with Trump-May meeting providing the backdrop to it.the Greenback lost a bit of strength as risk appetite soured across the board.

With the Federal Reserve announcing that the US is close to full employment, they may be looking ahead to unwind the Fed balance sheet and increase interest rates, although Fed Chair Janet Yellen insists that this has to be a very ‘gradual’ procedure which puts the Fed back into dovish mode. The overnight slump in the US Dollar mainly happened due to the lack of fiscal policy clarity as promised by Donald Trump. Most of the trading today will be subdued in the absence of any economic data from the US. For the euro, ECB President Mario Draghi is speaking later today and as per his dovish stance in his speech last week that the Eurozone is meandering on towards growth, he did manage to reiterate that inflation expectations have been edging higher in the Eurozone due to rising bond yields and the uptick in oil prices. With a barren economic calendar on the cards, most of the movement for the EURUSD pair will come from statements made by Mario Draghi in his speech today.

Sterling overlooks Friday’s weak retail sales

Sterling has overlooked Friday’s weak retail sales numbers and moved up against all its major counterparts mainly owing to weakness in the Greenback. Meanwhile, Prime Minister Theresa May will offer to deal with UK business ‘sector-wise’ including a push towards an industrial strategy to retain manufacturing in the UK to promote future growth as they make their way out of the EU and the Single Market. With no economic data out today from the UK, focus will continue to be on updates emanating from Brexit developments.

Leave a Reply