Good Morning All;
as we return with our first report for 2017 the two big geopolitical issues that will likely drive sentiment on currency markets in the year ahead are front and centre from the beginning. The looming Trump US Presidency and the British divorce from the EU have consumed markets from the get-go in 2017.
Trump’s first open press conference in approximately 6-months helped turn market sentiment against what had been a strong USD performance during the holiday season. The market reacted to what was interpreted as ongoing uncertainty and perceived vagueness in regard to Trump’s policy priorities when very little of substance emerged from the press conference. After nudging above 0.7500 against the USD in late trading on Friday the AUD has now opened the week just below this at 0.7490.
The commencement of the Trump presidency will undoubtedly dominate this week’s news cycle and we are anticipating whippy trading conditions as the market reacts to each and every utterance that emerges most probably via Twitter!
British Prime Minister Theresa May is also scheduled to speak this week regarding the UK’s Brexit strategy. It has emerged in recent days that Prime Minister May is contemplating Brexit terms that would be considered “hard” in order for the UK to regain control over immigration and removal from the jurisdiction of the European Court of Justice. Again, only time will tell how smooth or rough the divorce proceedings will be, however recent events in the Northern Ireland parliament could impact the timing of the Brexit trigger being pulled.
IN addition to the political machinations of the week ahead there is also a raft of economic data, speeches and central bank meetings to be considered. Australian data this week will be dominated by the December employment results on Thursday with a turnaround expected following the stronger than anticipated November result. This data series is notoriously fickle and unpredictable as a result of the data collection methods by the Australian Bureau of Statistics. Unemployment is expected to remain steady around 5.7% however a 38k increase in jobs as per November is highly unlikely.
The MI Inflation Gauge index is due on Monday and will make for somewhat interesting reading ahead of the RBA’s first meeting of the year in February. Home loans and vehicle sales follow on Tuesday with Consumer Sentiment data on Wednesday.
New Zealand data this week is dominated by building consents and manufacturing figures alongside the important GlobalDairyTrade Auction results. 2017 will be an interesting year for New Zealand as new Prime Minister Bill English seeks to put his stamp on the nation with the strong NZD also likely to remain a talking point throughout.
With the Trump inauguration coming late this week it is also important to note that US economic data continues unabated. There will also be speeches by Fed members as well as the Fed Chair Yellen. These speeches could provide an interesting prelude to the year ahead and a backdrop to the relationship between the Fed and incoming President. Unemployment claims data for the US will be released late this week and we believe that this data series in 2017 and beyond as well as the monthly non-farm payrolls data will be relentlessly used to frame the success of the Trump Presidency as a key plank of his election success in the American heartland.
The ECB is due to meet later this week whilst the World Economic Forum in Davos, Switzerland is also taking place. This year’s forum is notable for the attendance of Chinese Premier Xi, the first time this has happened. With the possibility of China being labelled a currency manipulator by the Trump administration it is likely that this emergence of China at key global economic forums will continue.