President Donald Trump’s heavy handed approach sent shockwaves through global financial markets last week as the threat of a trade war looms between the United States and Mexico. After abandoning plans to meet with Trump on Tuesday, Mexican President Pena Nieto promised that Mexico would not pay for the proposed border wall. The result was another plunge in the Peso before the currency managed to recover modestly.
Meanwhile, US growth took a turn in the fourth quarter, backpedaling to 1.90% annualized growth compared to the 3.50% recorded during the third quarter. Lower exports of soybeans combined with weaker personal consumption expenditures were the primary culprits. In other news, the United Kingdom’s 2016 annualized growth of 2.20% put it at the top of advanced economies belonging to the G7. Though the UK Supreme Court ruling requiring both Houses of Parliament to vote on triggering Article 50 may have given the “remain” camp a bit of hope, parliamentarians are still expected to respect the referendum result. Finally, in Japan, export growth turning positive for the first time in 15-months in a sign that trade is improving. However, headline inflation tapered modestly while core inflation remains in deflationary territory on an annualized basis, complicating the outlook for consumer prices.