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Never doubt the impact a speech can have. Prime Minister Theresa May’s first interview in 2017 has revived talk of a ‘hard Brexit’ following a conspicuously quiet Christmas and New Year, providing an immediate impact in currency markets. During the morning trading session on Monday Pound Sterling has retraced its November recovery, with Cable to falling back to its lowest level since October whilst the British currency reached an eight-week low against the Euro. Despite the likelihood of ministers moving to downplay the perceived policy implications resulting from the interview, Sterling’s start to the week on the back foot may well continue until Wednesday’s UK macroeconomic data release.
Yet it is a speech from her incoming counterpart in the US, Donald Trump, that could take the headlines this week and move currencies further. His propensity to air his views through the medium of Twitter in recent weeks has erred CEOs and investors alike, therefore his announcement of a general press conference on Wednesday has been eyed with great anticipation and trepidation alike.
As a result, it is likely that Trump’s rhetoric from this press conference is likely to have a great bearing on markets throughout the latter half of the week. Reiterating the introduction of a vast fiscal stimulus that may well result in increased inflationary pressures could see the Dollar rally on expectations that the Fed will indeed hike rates three times this year. On the other side of the coin, any mention of increased tariffs, a trade war with China or currency manipulation in South Asia could be detrimental to the greenback’s prospects.
With that said, however, a host of Federal Reserve speakers may look to tip the spotlight away from the President-elect and anything he might (or might not) say. After last week’s particularly bullish comments from San Francisco Fed President Williams, stating that need for fiscal input from the incoming administration is not as necessary as budget deficit management, markets will be looking for any agreement or rebuttal from his colleagues. A quintuple showing from members on Thursday, headlined by a speech Chair Janet Yellen, could make for an interesting session should any significant divergence in views emerge from within the Central Bank.
Meanwhile, with political risk in Europe still a distance over the horizon, the Euro is once again set to tread a sideways channel unless impacted by corresponding strength or weakness from its UK and US equivalents amidst a dearth of data and speakers alike.
Macroeconomic data impact on all three currencies is likely to minimal in the most part, with significant data releases few and far between following last Friday’s US Jobs Report data dump. Wednesday provides the only Sterling-relevant macro releases, with the impetus being placed on Industrial Production and the NIESR GDP Estimate for any indication of further strength in the UK economy following a string of impressive data releases. Retail Sales, Produce Price Index (PPI Inflation) and the University of Michigan Consumer Sentiment, all released on Friday, are the top US data picks for the week; Euro-watchers, meanwhile, will be on the lookout for further hard Brexit rhetoric and the results of Trump’s conference on Wednesday for weekly direction.
Key data this week (Sign up here to get our daily live macro-calendar)
UK Economic Announcements
08:30 Halifax House Prices
Intl Economic Announcements
07:00 Industrial Production, Imports/Exports (DE)
09:30 Sentix Investor Confidence (EZ)
10:00 Unemployment Rate (EZ)
—
Intl Economic Announcement
01:30 CPI, PPI (CN)
05:00 Consumer Confidence (JP)
11:00 NFIB Business Optimism (US)
15:00 Wholesale Inventories (US)
—
UK Economic Announcements
09:30 Construction Output, Industrial & Manufacturing Production
15:00 NIESR GDP Estimate
Intl Economic Announcements
05:00 Leading & Coincident Index (JP)
12:00 MBA Mortgage Applications (US)
15:30 Crude Oil Inventories (US)
—
UK Economic Announcements
00:01 RICS House Price Balance
Intl Economic Announcements
10:00 Industrial Production (EZ)
13:30 Weekly Jobless Claims (US)
—
Intl Economic Announcements
N/A Imports & Exports (CN)
13:30 Advance Retail Sales, PPI (US)
15:00 Uni. of Michigan, Business Inventories (US)
Technicals
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