Trump Chooses White House Chiefs, as Europe Awaits Possible QE News
Investor focus this week is expected to hover around topics related to US politics. The newly elected US President, Donald Trump will spend the week trying to fill thousands of top government positions. These include White House aides, cabinet secretaries, and other high ranking officials who are responsible in dealing with both domestic and foreign policy. He has named Reince Priebus as his White House chief of staff and the far-right Steve Bannon as his chief strategist and senior counsellor. Another big event this week will be the US Federal Reserve (Fed) Chairwoman, Janet Yellen’s speech following the surprise Trump win.
The most important event today will be a speech by the European Central Bank (ECB) President, Mario Draghi. Additionally, the Eurozone’s industrial production data for September is also awaited. Today, Boris Johnson, the UK’s foreign secretary, is attending a meeting of EU foreign ministers in Brussels where they will discuss Trump’s election. Boris told reporters that Trump’s election is a “good thing” for Britain and Europe.
Pound Sterling – UK Markets
The Pound is trading with a bearish tone against the greenback this morning. Data released earlier in the session showed that UK’s Rightmove house price index declined in November. The British data docket does not have any other significant releases lined up for today.
Going ahead, UK’s economic calendar looks pretty busy this week, with the nation’s October CPI figures being a salient data point. Price growth is projected to witness an increase at both the monthly and annual level. Britain’s inflation already showed a robust rise in September and a continued increase will weaken the possibility of an interest rate cut by the Bank of England (BoE) at its December monetary policy meeting. Moreover, the average earnings report, will be watched by investors this week as it is a key indicator of inflation pressures. It will be released along with the unemployment rate and claimant count data. Later, this week rounds off with British retail sales data and is expected to register an increase for October.
US Dollar – US Markets
The greenback strengthened against most of its major peers on Friday. Data indicated that the US Reuters/Michigan consumer sentiment index increased more than anticipated in November, notching its highest level in five months and boosting optimism over the health of the nation’s economy. Separately, the Fed Vice Chairman, Stanley Fischer, hinted that the central bank is close to achieving its dual mandate of 2.0% longer-run inflation target and growth of employment, thus supporting the case for a gradual increase in interest rates. However, he did not lay out the exact timing for any move and cautioned that the “future is uncertain and that monetary policy is not on a pre-set course.”
The US Dollar is trading on a stronger footing against the Pound and the common currency this morning. Investors would eye speeches from Fed key members, Jeffrey Lacker and John Williams, scheduled later today. Later in the week, market participants will focus on US consumer price index and advance retail sales data for further cues in the greenback.
Euro – European Markets
The shared currency is trading lower against the greenback and the shared currency this morning. Data released earlier during the session showed that Italian consumer prices declined in October. Going ahead, market participants await release of the Eurozone’s industrial production data and is expected to post a drop for September. Later in the day, the ECB President, Mario Draghi is scheduled to speak in Rome, Italy. This will be his first appearance after the US election and as the countdown to the ECB’s December meeting begins. Any comments on the future of the quantitative easing programme will be closely watched. Looking further ahead, the second estimate of Eurozone’s consumer prices for October is the highlight this week. Apart from this, German and Eurozone ZEW sentiment index is also due for release and is considered a good indicator of future growth.
On Friday, the Euro dropped for the fifth consecutive session against the US Dollar. On the data front, German consumer prices rose in line with market expectations, both at the monthly and annual level.
Other Currencies – Highlights
The Japanese Yen is trading on a weaker footing against the US Dollar this morning, amid a broad-based strength in the greenback as it is being sought as a safe-haven currency post the US election. Japan received a dose of good news early in the session. The nation’s gross domestic product (GDP) expanded at a faster than anticipated rate during the third quarter of this year, buoyed by higher exports. On an annual basis, Japan recorded the third consecutive quarter of expansion. However, the latest data cast doubts on the country’s sustainable economic recovery, as domestic activity continues to remain weak. Japanese firms have relied on overseas sales to make up for the lacklustre domestic demand. In other economic news, Japan’s industrial production advanced for the second consecutive month in September.
Separately, the Bank of Japan Governor, Haruhiko Kuroda warned that Japan’s private consumption continues to lack momentum which is making some companies hesitant to raise prices, thus potentially delaying achievement of the central bank’s inflation target.