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Following nearly four years at the helm of the world’s most influential central bank, Janet Yellen will chair her final meeting as the head of the US Federal Reserve this week before handing the reigns over to her colleague Jerome Powell. But while the meeting may be momentous in terms of leadership, in terms of policy, the event is unlikely to be ground-breaking.
Yellen, a policy dove and never one to rock the boat despite raising interest rates for the first time since the 2008 financial crisis, is likely to bow out in a no-frills affair with no policy changes being announced. Instead, the focus will be on any changes to the inflation and interest rate forecasts offered by policymakers.
And the meeting may even be overshadowed by events taking place on the previous day.
President Trump delivers his first official State of the Union address on Tuesday, just days after his address to world leaders at the World Economic Forum in Davos. Having struck a conciliatory tone in the first visit to Davos by a sitting US President since Clinton in 2000, all eyes will be watching for the Presidential Trump to once again make an appearance.
No matter which side of Trump shows up, there is expected to be at least one major announcement: the commencement of a $1 trillion investment in US infrastructure, the third economic pillar of Trump’s campaign policy (after repealing Obamacare and tax reform).
A powerful address, free from off-topic ramblings and continuing his pro-US economic appeal from Davos, could further help the US dollar recover from recent 3-year lows. A messy affair, however, will do little to aid the recovery.
Remaining in the US, Friday’s Non-Farm Payrolls are expected to rebound from a weak December print, while Unemployment is expected to remain at a 17-year low of 4.1%.
Meanwhile, UK Prime Minister May will visit China this week against a backdrop of rising complications in the Government’s Brexit process. Concerns that lawmakers’ demand to implement only the EU they want, as opposed to the full EU lawbook, during a transition period has been met with opposition in Brussels, threatening to delay further negotiations.
However, despite worries about Brexit talks, bullish bets on Sterling are at a 4-year high, according to the US CTFC (Commodity Futures Trading Commission) as traders see US political uncertainty ahead of November mid-terms as a greater worry than Brexit.
Expect some excitement on Tuesday as Bank of England Governor Mark Carney appears before the House of Lords Economic Affairs Committee (3:30pm), with traders watching closely to see if the Governor will be drawn into a drawn-out Brexit debate, as well as clarification on his monetary policy guidance (will we see a rate hike before year’s end?).
The Euro will likely be driven by macro data releases this week, with a range of top tier releases scheduled throughout the week. Tuesday sees both Eurozone Q4 GDP (10am) and German Inflation (1pm), before Wednesday morning’s Eurozone Inflation print (10am).
Eurozone GDP is expected unchanged at 2.6% in the fourth quarter, remaining at its highest level since 2011, while Inflation is seen falling for a third consecutive month, despite consensus for the previous day’s German print pointing towards unchanged.
Other major macro data this week includes US Consumer Confidence (Tuesday; 3pm), UK GFK Consumer Confidence (Wednesday; midnight) US ADP Employment (Weds; 1:15pm), US Chicago PMI (Weds; 2:45pm), US Pending Home Sales (Weds; 3pm), UK PMI Manufacturing (Thursday; 9:30am), US ISM Manufacturing (Thurs; 3pm), UK PMI Construction (Friday; 9:30am) and US Uni of Michigan Consumer Sentiment (Fri; 3pm).
Key data this week (Sign up here to receive our daily live macro-calendar)
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UK Economic Announcements
09:30 Consumer Borrowing, Mortgage Lending
Intl Economic Announcements
06:30 GDP (France)
10:00 GDP (Eurozone)
13:00 Inflation (Germany)
14:00 S&P House Price (US)
15:00 Consumer Confidence (US)
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UK Economic Announcements
00:01 GFK Consumer Confidence
Intl Economic Announcements
01:00 PMI Manufacturing & Non-Manufacturing (China)
10:00 Inflation & Unemployment (Eurozone)
13:15 ADP Employment (US)
14:45 Chicago PMI (US)
15:00 Pending Home Sales (US)
15:30 Oil Inventories (US)
19:00 Fed Monetary Policy decision
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UK Economic Announcements
09:30 PMI Manufacturing
Intl Economic Announcements
01:45 Caixin PMI (China)
15:00 ISM Manufacturing (US)
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UK Economic Announcements
09:30 PMI Construction
Intl Economic Announcements
13:30 Non-Farm Payrolls, Unemployment, Earnings (US)
15:00 Uni of Michigan Consumer Sentiment (US)
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