Financial markets across the globe took a more subdued tone last week as Trump’s final steps of ascendency to the US Presidency was completed, bringing about a sense of uncertainty and anxiety. Aside from the attention on politics, American economic fundamentals showed additional traction with December inflation figures coming in hotter than expected, reinforcing the Federal Reserve’s ability to continue tightening monetary policy. With both headline and core annualized inflation figures above 2.00%, the conditions for further rate hikes are broadly intact.
UK consumer price inflation also came in stronger during the latest reading, however, the main event was Prime Minister Theresa May’s comments on Brexit, stating that any final deal required a parliamentary vote of approval. The announcement sent the Pound higher for its best performance since 2008. In mainland Europe, the European Central Bank left interest rates on hold and asset purchases unchanged while continuing to highlight the potential downside risks to the outlook. The Bank of Canada took a similar stance, warning about the risk factors that could bring about additional accommodation. Finally, Chinese GDP came in at 6.70% for 2016, printing within the 6.50-7.00% range targeted by officials despite decelerating fixed asset investment growth and weaker industrial production expansion.