Daily Market Report 200117

ceckGood morning, in today’s report:

·         Asian equities trade mixed overnight as USD weakens
·         ECB leaves rates on hold as expected
·         Markets look to President-elect Donald Trump’s inauguration

Market News
·         Following the weak performance of European and US equity markets, Asian stocks traded mixed overnight. The USD weakened after less aggressive comments yesterday night by Fed Chair Yellen (compared with her speech on Wednesday)

o    Yellen commented that economic growth seems “unlikely to pick up markedly in the near term”. She stated that the Fed is not behind the curve in containing inflation and that she considers it “prudent to adjust the stance of monetary policy gradually over time.”
·         As was widely expected, the ECB left policy on hold at yesterday’s meeting. ECB President Draghi commented that the increase in headline inflation is largely the result of base effects driven by energy and food prices and may be only temporary, whilst noting that the GC saw no signs that underlying core inflation was improving or would be improving in the months ahead
o    During the Q&A, President Draghi explained that the definition of price stability was based on the medium term and had to be a durable and self sustained convergence for the whole of the euro area
o    We do not expect euro area headline inflation to be self-sustained at close to 2% in 2018 and Barclays Research…” expect monetary accommodation to persist into 2018, but at a reduced pace of c.EUR35-40bn in H1 and EUR15-20bn in H2…”
·         GBP had a calmer day yesterday. The response to Theresa May’s speech in Davos was somewhat muted as she reiterated points made in her speech on Tuesday around Britain being open for trade
o    GBPUSD support remains at 1.2250, with short-term resistance around the 1.2400-1.2430 area.  EURGBP support comes in at 0.8600, with resistance at 0.8700
·         The key event today is the inauguration of President-elect Donald Trump as he is sworn in as the 45th President of the US
o    Markets will closely follow Trump’s inaugural speech (c.17.00 LDN) for any information regarding the direction of his administration, although this might not be the ideal setting for specific policy discussion
o    Market attention in coming weeks will likely be on tax reform and the potential implementation of protectionist trade policies.
 
What to Watch for Today
·         This morning at 09.30 we watch for UK retail sales (Barclays Research: -1.0% m/m, Consensus: -0.1% m/m).This afternoon markets will closely follow Trumps inaugural speech, scheduled for after he is sworn in at 17.00
·         Other speakers of note today include Philadelphia Fed President Harker (FOMC non-voter) at 14.00 and San Francisco Fed President Williams (FOMC non-voter) at 18.00  

 

Regards All.
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