Very little new financial news to report this morning with all the recent major themes still intact. We also expect a quiet day today with very little data or events of note scheduled. However, as the week progresses we have a number of key events. Starting tomorrow we have German GDP data followed by key UK inflation figures. Later in the week, we have the likes of Eurozone GDP, German ZEW, UK Retail sales plus a two day G20 meeting of Finance Ministers starting Thursday, where no doubt currencies and their respective policies will be discussed.
This week could be an interesting one for the US Dollar especially after last week’s comments by President Trump that we highlighted on Friday, where he alluded to “something phenomenal on tax in the next two to three weeks”. As a result of those comments, the broad-based Dollar Index reversed its recent weakness, posting its first weekly gains since the end of December. US equities were also marginally buoyed too with the main indices posting gains such as the DJIA up 0.48% and Nasdaq 0.28%.
Looking ahead plenty to keep an eye on ranging from several Federal Reserve officials speaking to US consumer prices and retails sales. A raft of various Fed members are scheduled at numerous events but no doubt Janet Yellen’s scheduled appearances before both the Senate Banking Panel on Tuesday followed by her semi-annual testimony to the House Panel on Wednesday. Fed watchers as ever will be closely monitoring the minute details on her speeches in order to garner some clues as to the path for future Fed rate hikes. At the moment, markets are pricing in a 36% chance of a March rate hike. As we have highlighted on numerous occasions, markets are expecting three hikes this year which we feel is potentially a bit too hawkish with an almost perfect backdrop needed to justify such moves.
Fiscal stimuli from President Trump is sure to have a say on the performance of the economy but as of yet we have seen little or no additional information from the new administration. Over the weekend, Federal Reserve Vice Chairman seemed to echo our sentiment stating that there remains “significant uncertainty” over the outlook for US Fiscal Policy.
Sterling opens this week on a slightly firmer footing albeit still within recent well defined ranges. Cable is back trading above 1.25 but yet again is meeting resistance at 1.2521 for moves higher. Similarly EURGBP is trading down close to .8500 (GBPEUR 1.1765) but yet again we continue to see buyers at the .8470/.8490 area.