One large deficit generates another
- The US federal government deficit was the largest since 2012, with record levels of interest payments (in spite of the low interest rate climate). Deficit-financed tax cuts at a time of full employment will do that. As the current account deficit is simply the sum of private and government deficits, this has implications for the politically sensitive topic of trade.
- The US is to decide whether to send Treasury Secretary Mnuchin to the Saudi "Davos in the desert" conference by Friday. This will be looked to as a signal of the health of US-Saudi relations. US President Trump has suggested "rogue agents" may have caused the presumed death of the journalist Khashoggi. The views of Congress are also relevant.
- Chinese consumer price inflation was boosted by higher food prices. Excluding food, weaker services prices helped subdue inflation. This has no relevance to international markets. New Zealand's inflation was stronger than expected, supporting the NZ dollar. Italian consumer price data is due.
- UK labor market data should continue to show strength in employment. Average earnings data may not be very representative because of the growth of self-employment. US industrial production data is unlikely to signal a US industrial renaissance.