Donald Trump Sworn in as 45th US President

Weekly Report - 22/01/2017

Dollar Retreat Sends Gold Higher


To cap off a week of important global economic data, the inauguration of Donald Trump went off largely without a hitch despite some of the biggest protests ever seen in the subsequent days.  Equity futures managed to finish the week on a slightly stronger note after trending mostly flat while the US dollar fell for another week after Trump talked the currency lower.

Last Week

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.


The Week Ahead

With the month of January slowly winding down and another Federal Reserve interest rate decision right around the corner, fundamental data due in the sessions ahead could have a major impact on the outlook.  United States gross domestic product for the fourth quarter is set to be released, with growth expected to taper to 2.10% from the 3.50% reported a quarter earlier.  Besides GDP, core durable goods orders and housing data pertaining to new and existing home sales are set to be announced.  Growth figures will also be reported by the United Kingdom, with consensus anticipating slightly weaker results compared to the previous quarter.

Moving towards Asia, Japan will be at the center of attention before Chinese Lunar New Year celebrations begin late in the week.  After a disappointing retreat in both exports and imports during November on an annualized basis, exports are forecast to rebound into positive territory while losses in imports narrow further.  The most important development for Japan will be the results of the latest readings on consumer price inflation.  Although headline inflation is forecast to stay in positive territory, core figures are projected to remain in deflationary territory.


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