Friday January 20, 2017 - 21:47:57 GMT
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Financial Markets Have A Number of Items To Juggle
John M. Bland, MBA
New USD Forex Policy?
On Friday Donald Trump was installed at the 45th President of the U.S. One top concern for currency traders is that the new administration could break with a bi-partisan policy of the U.S. (and G7) not to use forex as an economic policy tool. A tweet suggesting he might has been a new element for the markets. This prospect has rattled the markets. Subsequently his comments were "clarified" to indicate his focus was on China and possibly Mexico, and not the major G7 units. This topic was raised several times in Treasury Secretary-designate Mnuchin's confirmation hearing. He repeatedly dodged the question, which suggests the question might still be open inside the Administration. We will see.
Yellen's Monetary Policy Remains Cautious
In a speech late Thursday at Stanford University, Fed Chair Yellen opened no new ground. Her comments on the economy and policy remained cautious. She sees little sign that the economy is overheating and indicated the Fed is not behind the curve. She repeated once again that it is prudent to raise rates at a gradual pace. She also noted the key uncertainty for monetary policy is fiscal policy outlook. Clearly the Fed in a wait and see posture until the policies of the new Republican government are weighed. This is not a time for bold Fed policy moves.
ECB Policies Unlikely To Change Soon
On Thursday, the latest ECB meeting saw no basic changes in European monetary policy. Nevertheless, the aftermath of the policy announcement saw considerable price volatility. There was no new word of the "tapering" of bond purchases other than to confirm that the central bank has extended its bond purchase program to the end of 2017. The central bank will continue to purchase bonds at the current monthly pace of EUR 80 billion until the end of March. From April 2017, net asset purchases will continue at a reduced monthly pace of EUR 60 billion until the end of December 2017.
Traders express disappointment at the lack of action by the ECB. Some say ECB President Draghi guarantees Euro weakness. He starts off every meeting with a cautious outlook for the European economy and that tends to weigh on the currency.
U.K. PM May Forging Ahead With Brexit
The major Tuesday speech by U.K. PM May on her plans for "Brexit" continues to impact trade. The British leader said she wanted no "half-in or half-out" agreements. Her goal remains complete political independence from the EU. The GBP remains vulnerable. On the other hand, she was pushing for new trade agreements with the EU. The tone of her speech was seen as being more conciliatory with Europe than many had been expecting.
The week-ahead calendar will be active following the Monday U.S. holiday. The top highlights are January flash PMI statistics, the German IFO Survey and an important ruling from the British Supreme Court on Brexit.
WEEKLY Forex Economic Calendar:
23 Jan Mon
No Major Data
24 Jan Tue
09:30 GB- Brexit Court Ruling
15:00 US- Existing Homes Sales
25 Jan Wed
00:30 AU- CPI
09:00 DE- IFO Survey
15:30 US- Crude
26 Jan Thu
09:30 GB- GDP
13:30 US- Weekly Jobless
14:45 US- flash Service PMI
15:00 US- New Homes Sales
23:30 JP- CPI
13:30 US- Durable Goods
13:30 US- GDP
15:00 US- University of Michigan
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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