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In the aftermath of a bungled Oscars ceremony, foreign exchange markets will be hoping that political and economic speakers this week creating avoid Hollywood-esque confusion with key speeches this week set to influence FX space.
President Donald Trump will likely take the headlines as he gives his first address to Congress on Tuesday evening, with markets expecting the US President to offer more details as to his self-styled ‘phenomenal’ tax reforms.
The key considerations for Trump’s speech will be threefold. First, and perhaps most crucially, will be whether he announces tax reform at all. All signs are pointing towards the President using the primetime slot (9pm stateside, 2am GMT) to announce his plans for US taxes, but as is always the case with the unpredictable Trump administration, this is not a certainty. If indeed he does announce the tax reform, then the second consideration for markets will be how much detail is divulged by the President. So far, promises of a phenomenal tax reform was enough to buoy markets in the short term, however the rally has in the past few days lost its shine as investors begin to question what actually is in store. Finally, markets will be looking for any further clarity on the other pillar of Trump’s fiscal policy stimulus – infrastructure spending. Having given an impassioned speech to a Conservative conference last week again reiterating his desire to rebuild US inner cities, could we also see details of the supposed $1 trillion plan divulged?
Should all three of these topics be covered by the President, then we could see a broad rally in the greenback relative to its peers, somewhat reminiscent of the post election rally that took the US dollar index to a 14-year high. This could then be touched upon in speeches by Fed Chair Janet Yellen on Friday and vocal dove Lael Brainard on Wendesday; a hawkish speech from the latter could indicate the FOMC pandering towards a March rate hike. However, a failure to confirm points two and three could result in a dollar sell off as markets are again left wanting for more details of reform.
Subsequently, US macro data may take the back seat this week as speakers take the headlines, although note Q4 GDP revisions on Tuesday could prove important given forecasts are pointing towards an uptick from the provisionally reported 1.8% YoY growth in Q4 to 2.1%, while Challenger Job Cuts on Thursday provide a warm up for next week’s Non-Farm Payrolls release.
Meanwhile, the House of Lords will once again be in focus for Sterling as the upper house of parliament begins its committee stage, starting with a debate on potential amendments to the Brexit bill on Monday. Key topics debated are expected to include a guarantee of rights for EU workers currently in Britain and a more meaningful vote for MPs on the final Brexit deal. With MPs deploring any action be taken by peers to attach amendments to the bill despite widely reported opposition, will the unelected house go against their elected counterparts?
Also on the radar for sterling is mounting calls for a second Scottish independence referendum after voting overwhelmingly to remain in the EU. While PM Theresa May’s office has vehemently denied that a second referendum on the cards, her Scottish counterpart Nicola Sturgeon may well look to stoke the fire further.
Lastly, alongside potential dollar strength/weakness, the French election race will again prove to be important to the fate of the Euro this week as independent candidate Macron gains ground thanks to collaboration with centrist candidate Bayrou, easing fears of a victory for right wing candidate Marine Le Pen and subsequently helping the dollar avoid an extended foray below $1.05.
Strong CPI readings from Germany and the headline Eurozone on Wednesday and Thursday respectively could provide some buoyancy for the Euro, even if the Dollar strengthens throughout the week, although the greenback will likely hold the European single currency to account.
Key data this week (Sign up here to get our daily live macro-calendar)
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Intl Economic Announcements
07:45 CPI (FR)
10:00 Confidence Indicators (EZ)
13:30 Durable Goods Orders (US)
15:00 Pending Home Sales (US)
23:50 Industrial Production, Retail Trade (JP)
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UK Economic Announcements
00:01 GfK Consumer Confidence, Lloyds Business Barometer
Intl Economic Announcements
06:30 Q4 GDP (FR)
07:45 CPI (FR)
10:00 CPI (EZ)
13:30 Q4 GDP, Advance Goods Trade Balance, Wholesale Inventories (US)
14:00 House Price Index (US)
15:00 Consumer Confidence, Richmond Fed Manuf. Index (US)
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UK Economic Announcements
00:01 BRC Shop Price Index
09:30 Manufacturing PMI, Mortgage Approvals
Intl Economic Announcements
01:00 Manufacturing, Non-Manufacturing PMI (CN)
08:55 Manufacturing PMI (DE)
09:00 Unemployment Rate (DE)
09:00 Manufacturing PMI (EZ)
12:00 Mortgage Approvals (US)
13:00 CPI (DE)
13:30 Personal Income & Consumption (US)
14:45 Manufacturing PMI (US)
15:00 ISM Manufacturing & Employment, Construction Spending (US)
15:30 DOE Crude Oil Inventories (US)
19:00 Fed Beige Book (US)
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Intl Economic Announcements
10:00 CPI, PPI (EZ)
12:30 Challenger Job Cuts (US)
13:30 Weekly Jobless Claims (US)
14:45 ISM New York (US)
23:30 CPI, Jobless Rate (JP)
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UK Economic Announcements
09:30 Services PMI
Intl Economic Announcements
00:30 PMI Services (JP)
01:45 PMI Services (CN)
05:00 Consumer Confidence (JP)
08:55 Services PMI (DE)
09:00 Services PMI (EZ)
09:00 GDP (IT)
10:00 Retail Sales (EZ)
14:45 Markit Services (US)
15:00 ISM Services (US)
18:00 Baker Hughes Rig Count (US)
18:00 Janet Yellen Speaks in Chicago (US)
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