The fate of the US economy will come into focus in the next few months. As president-elect Trump turns into President Trump, the rhetoric will change. What will happen? No one knows for sure.
The US Market
Fed chair Janet Yellen stated yesterday that the US economy is nearing full employment and that inflationary targets are moving towards the goal of 2%. Yellen noted that there would be ‘’a few’’ rate hikes a year until 2019. The hawkish sentiments from Yellen pushed the dollar upwards.
However, investors remain cautious the day before Donald Trump’s inauguration. The market remains reserved and question if Trump can deliver the fiscal stimulus promised. Investors worry that Trump’s protectionism policies will undo potential growth. This scepticism means that investors think it’s unlikely that there will be more than two rate hikes in 2017.
The first month of Trump’s presidency is crucial for the greenback, in the next week we will see a pivotal point emerge for the currency.
European Market
The European Central Bank’s chief Mario Draghi will speak at a conference later today. Inflationary data shows that there was an increase of 1.7% last month. Pressure is mounting on the ECB to ease-off on it’s bond-purchase program.
There is an air of uncertainty in Europe. With major elections scheduled for 2017 and the imminent Brexit negotiations as well as a new controversial president in the US, there will be profound changes that could shock the European economy. Thus, the ECB are not expected to make any changes.
The EURUSD is trading at $1.06389 this morning, up 0.09%.
The UK Market
UK Prime Minister Theresa May’s comments moved Cable to impressive advances. Sterling is holding much of it’s gains from this morning’s trading. The next level Cable must break is the $1.50 mark.
The markets hold tight in anticipation of Trump’s inauguration tomorrow.
Commodities
Crude oil is up 0.5% today, trading at $52.49. The commodity is waiting in suspense for the crude oil inventories scheduled for later today. Forecast for output are estimated to be 0.1M.
As dollar rebounded, gold slipped down this morning. Yellen’s outlook on rates sent gold lower. The Fed Chair stated that there would be a gradual lift of rates in the coming years. This was bad news for gold. Gold is down 0.3% this morning, trading at $1199.30.
Market Watchlist
US banks were the strongest performers yesterday. Following Donald Trump’s election there has been a sharp increase in the amount of trading, boosting US bank’s revenue by 26%.
Watch out for leading US banks; JP Morgan, Bank of America (NYSE:BAC), Citi, Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS).