In a press conference yesterday, President Obama warned Donald Trump that he can expect to get a wake-up call once he is in office and that he will have to be wary of what he says once President. Trump has been criticised for the tone of his speeches and comments with protests taking place all over the US against claims he has main against various minority groups. Since his election he has toned down his comments but Obama has said that Trump’s views do not match up with reality, alluding to various promises Trump has made. Markets continue to rally with the SPX500 trading at the 2100 level, above pre-election highs following an initial rout, the NAS100 on the other hand remains lower trading just above November lows.
US dollar remains strong. The US dollar has remained near a 14 year high against its peers as Treasury Yields continue to climb as investors in the US look to stoking inflation ahead of Trumps likely introduction of expansionary fiscal policy. These factors have caused Asian stocks and currencies to come under pressure, especially emerging market economies with the likely policy mix under a Trump presidency causing capital outflows. The possible policy mix involves higher interest rates and simulative fiscal policy as Trump looks to ramp up infrastructure spending and tax cuts to spur higher growth and inflation. The Federal Reserve is now 92% likely to raise rates in December.
Eurozone GDP due today. Big news from the Eurozone today in the form of GDP figures, expected unchanged at +0.3% QoQ and +1.6% YoY. However, Eurozone CPI out later in the week is likely to be more important for the ECB and policymakers, acting as a signal as to whether the ECB’s monetary easing policies are effective and whether or not something more needs to be done. German GDP out this morning was weaker than expected at +1.75 YoY and +0.2%QoQ, this will come as a blow to the Eurozone as the largest economy struggles to maintain upward trending growth. However, Brexit uncertainty is likely to feed into Eurozone growth and we could see an overall downtrend for the area. German ZEW survey is due today expected marginally better at 61.5 compared to 59.5 and economic sentiment figures are expected to jump to 8.1 from 6.2.
May seeks help – tough task for Hammond. Speaking on Monday, Theresa May has called on business leaders to help her give confidence back to the public who have become disillusioned with elitism in politics. Speaking in London in a move to build an economy that ‘works for everyone’, the Prime Minister hopes to build a case for globalisation, where by the government and businesses must display the benefits of global trade and liberalism. This has meant that Phillip Hammond, the Chancellor of the Exchequer, will likely announce on the 23rd November, spending and tax plans that will benefit families that are just getting by. He has been left a daunting task to try and ease the squeeze on living standards at a time when the government spends more than it receives, which will likely only get worse as the UK economy slows and tax revenues decrease. Hammond and Trump may have some similarities as Hammond has hinted of increased spending on infrastructure, whilst he is also likely to increase new home builds and incentives to households.
UK CPI. UK CPI, out this morning, is expected higher at +1.1% YoY and +1.5% for the core figure. The Eurozone is set for a vastly different outlook with CPI expected to fall on the month to +0.3% but remain steady YoY at +0.5%. CPI will come sharply into focus over the Brexit negotiations as Sterling weakness persists making foreign goods more expensive for importers. We can expect to see the Bank of England address these concerns in upcoming meetings with the chance of a rate hike almost as likely as a rate cut in a bid to curb inflationary pressures. GBPUSD continues to trade just above the $1.24 level.