Trump-Watching Likely to Overshadow Sparse Economic Data Docket

2017-01-31 08:48:00

Talking Points:

British Pound, Yen retrace yesterday’s outsized moves vs. FX majors
Euro unlikely to find potent lead in German jobs, Eurozone CPI data
Trump-watching will probably overshadow sparse economic docket

Currency markets delivered a mixed performance in Asian trade. The British Pound was a narrow standout, rising against its major counterparts in a move that looked corrective after the prior day’s laggard showing. The Japanese Yen ticked lower for seemingly analogous reasons, with prices probably in digestion mode after scoring the largest gain in a week in yesterday’s session.

German unemployment and Eurozone CPI figures headline the economic calendar in European trading hours. Neither result seems likely to inspire much a response from the Euro considering the figures’ limited ability to alter the course of near-term ECB monetary policy. Mario Draghi and company appear to be locked into wait-and-see mode having extended QE through the rest of the year, and seemingly with good reason.

Later in the day, a modest offering of US economic data seems unlikely to divert the attention of Trump-watching investors. The newly minted President has raised more than a few eyebrows in recent days as his administration moved to implement some of the more controversial bits of his platform, souring hopes that fiery rhetoric would give way to a pragmatic, center-right approach once he is in office.

Tellingly, the so-called “Trump trade” has been in retreat, with those assets that did well after in the immediate aftermath of the election (stocks, the US Dollar) now on the defensive while those that had been battered (US Treasury bonds, gold) mounting a spirited recovery. The path of least resistance seems to favor more of the same, although an elevated sensitivity to headline risk means a rapid about-face is hardly out of the question.

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