European markets and US futures have lost some steam and failing to pick up the positive momentum from Wall Street. Looking at the markets; it appears that traders have decided that they may be able to work with the split government. This can be actually good for them as this will keep the Trump administration in check. The hope is that we won’t see may gridlock situations but something where both parties can work together. Mr Trump has already shown his willingness to work with Democrats. He has said that his focus remains on growth and infrastructure projects. I think as long as his emphasis remains on vital issues like these (rather than other ridiculous policies like building the wall), there is a hope that he can claim some more victory tokens in the next few years.
Now, that the U.S Midterm elections are firmly behind us the focus is going to shift on the Fed policy. The dollar index is trading lower and among the G10 currencies, it’s performance is lacklustre. The FOMC announcement on Thursday is something that we need to be prepared for. What is baked in the price is no change in the interest rate. We also expect the Fed to confirm their commitment towards future interest rate hike or in other words; bring the interest rates to their normal level. The Fed hasn’t been much vocal about the trade uncertainties which are created due to the ongoing war between the US and China. However, one can only turn a blind eye to something for a limited time only. Looking at the Beige Book, the picture around trade uncertainties become real. We are not saying that the U.S economy is weak, but the reality is that there has been some setback for the U.S. economy. The weakness is around the housing market, manufacturing activity and consumer spending. All three of these are leading indicators if you want to measure the real economic health of an economy. Having said this, what is still robust is the labour market and there is some labour shortage in certain districts.
So, the overall impact of the upcoming FOMC meeting on the dollar would not be significant, because the Fed has already increased the interest rate and more importantly, there is no press conference scheduled. As long as the statement remains unchanged which we expect, we think there could be some small upward move for the dollar index.
Burberry Group PLC (LON:BRBY) has proven one thing that hiring the right person for the right job matters a lot. The company reported smashing numbers today and its half-year adjusted profit was £173m, a number which was ahead of consensus number of £169m. Designer Ricardo, is the hope for the company and his collection has received exceptional response despite the fact that most products won't reach stores until February. The company styled ad campaign resonated with it’s lovers. This was something which the firm was lacking. What Burberry has realised that it needs to create FOMO among it’s customers and have more limited lines is the way forward. Communication and delivering a product which the users like is the key to the fashion industry because the competition is as fierce as it can be. In order to create the buzz and keep it going, companies needs to be more active on social platforms e.g Instagram and Facebook (NASDAQ:FB). Burberry still needs to address the growth equation as competitors like Gucci and LVMH are far ahead of the game. In other words, their growth is nearly in double-digit and Burberry has a lot to catch up.