27 Jan 2017
The week ahead: Monday 30 January 2017
We expect markets to remain heavily focused on developments Stateside next week as President Trump continues to bash quickly through his list of policy priorities in his early days.
- Globally, markets will be focused on whether he continues to show a high degree of commitment to implementing his pre-election promises and whether he gets onto detailing his fiscal plans. We think that whilst Mr Trump is likely to remain committed to executing his promised fiscal support in the way he has been keen to deliver on wider pledges like withdrawing from the Trans-Pacific Partnership. But delivering on domestic policy issues, such as these, will be more challenging with Congress more involved. This could rein in his ambitions.
- The US focus is also likely to be enhanced by a Fed policy announcement due on Wednesday and with payroll numbers rounding off the week. We anticipate that the Fed will leave policy unchanged, but that it will phrase its statement such that it allows itself another policy move relatively soon, subject to the data. Our full FOMC preview is below. We expect the US jobs report at the end of the week to show a bit of a pick-up in the pace of non-farm payroll gains in January as the economy holds up well in the months after Mr Trump’s election victory.
- Aside from the Fed there are two further top-tier central bank meetings taking place next week. The Bank of England will, we expect, announce a ‘no change’ policy decision next Thursday lunchtime. Governor Carney will give a press conference accompanying the release of the Bank’s latest Inflation Report, which markets will be closely tuned in to for any hints that the Bank’s stance is moving from neutral to slightly more hawkish, as inflation begins to move up and the economy continues to perform well. Note that our full preview to this meeting will be released shortly. The Bank of Japan announcement is due early Tuesday, though no major policy changes are anticipated.
- For UK focused markets we anticipate that discussions and developments in taking forward the UK’s Brexit trigger bill will be important, particularly if they provide any hints that point to the government running into trouble in reaching its end March timeline for triggering ‘Article 50’, which for now the government still believes it is on track with. The first parliamentary debate has been scheduled for 31 January. On the domestic data front, consumer confidence for January, mortgage approvals and lending data and the UK’s services, manufacturing and construction PMIs will be key focal points. The PMIs in particular will be watched for signs that the UK economy is still firing on all cylinders as these surveys suggested it was as 2016 closed.
- From the Eurozone, the release of German and Eurozone inflation figures will be a focus. However we note that ECB President Mario Draghi remained relatively relaxed about upward movements in inflation and unpressured by German calls for tighter policy as German inflation moves higher. Q4 Euro area preliminary GDP figures are also due and will likely be a top level focus, with the early consensus for growth of 0.4% q/q from Q3’s 0.3% pace. In political developments next week, we suspect wrangling over what to do about the Italian Constitutional Court ruling that Italy’s election system needs a shake-up, will continue. This will likely include debate about when and if Italy should head to early elections.
- Finally, we note that China will be celebrating with its Lunar New Year holiday so Chinese economic news will likely be quieter than normal. However the ‘official’ and Caixin PMIs are still set for release from Wednesday 1 February. VC