20 Jan 2017

The week ahead: Monday 23 January 2017

Philip Shaw

Chief Economist

Next week will start with a new President of the United States residing in the White House following Donald Trump’s inauguration tomorrow (Friday 20th January).

After numerous policy suggestions from the President-elect, markets will be watching out for some hard policy proposals from Mr Trump once he is in office. Currency markets in particular will be watching out for whether Mr Trump does label China a ‘currency manipulator’ on his first day in the Oval Office as previously promised.

Away from the Presidency, another key question for 2017 will be when the Federal Reserve tightens policy again. Last night saw Fed Chair Janet Yellen take a slightly more hawkish stance. Although Chair Yellen would not be drawn on the timing of the next hike, she did warn of the risks of waiting too long. As ever the key to this will be the evolution of the US economy, with next week providing a number of data points. Top among them will be Friday’s release of Q4 GDP. Additionally a number of housing market releases will be due, as well as Michigan consumer sentiment and durable goods.

On this side of the Atlantic there are a number of important political events. Domestically the focus will be on the Supreme Court on Tuesday morning. The Court is set to announce its ruling on the Government’s appeal of the High Court decision, which ruled that Parliamentary approval was required for triggering Article 50. Should the Supreme Court uphold the original decision the Government will need to seek Parliamentary consent. Reportedly this will be in the form of a tightly worded, very short Bill, which will be sent to both the House of Commons and Lords. The hope is that there will be few or no attempts to amend it, thus allowing Article 50 to be triggered by the end of March, as planned. Away from politics, BoE Governor Mark Carney is set to speak from Germany mid-week, perhaps giving some final monetary policy clues ahead of the February Inflation Report.

Aside from the Supreme Court ruling, the ONS is set to publish a number of key data releases including Q4 GDP, which we expect to have slowed very marginally to +0.5% (q/q) from the +0.6% witnessed in Q3. Additional publications will include the public finances and housing related figures (BBA mortgage approvals and Nationwide house prices).

Elsewhere in Europe another Court in action next week will be the Italian Constitutional Court which will hold a hearing on Italy’s new electoral law. The importance of this is that it could have a bearing on the timing of a potential early election.

Within the Eurozone several key surveys will be released including the Composite PMI, which we expect to show a small rise, and Germany’s IfO. Additionally the Eurogroup of Finance ministers is set to meet, with Greece high on the agenda.

Finally, OPEC will meet in Vienna (Saturday 21 January) to evaluate the adherence to the output cut, whilst China will begin its Lunar New Year holiday on Friday. RD

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