Backing away, not going away

Posted by: Paul Donovan

09 Jan 2020
  • US President Trump appears to be backing away from a military escalation with Iran. This does not mean that general political risk is going away. 2020 is a political year for markets. US President Trump has two areas of policy control under the commander in chief powers – trade and military policy. These are likely to remain in focus.
  • China's consumer price inflation has stabilized somewhat, with pork price inflation slowing to 97% year-on-year. This has little global relevance (pork inflation in the US and the UK is hovering around 1% y/y). However, if moderating inflation allows the PBoC to offer more policy accommodation at some stage, there may be a limited global reaction to that.
  • German trade and industrial production data is due. Manufacturing orders numbers were disappointing, and weak global demand was part of that. US President Trump's trade tax uncertainty has done lasting damage to investment, which hurts Germany more than other economies. The service sector is still holding up, however.
  • Various central bank speakers crowd the agenda. BoE Governor Carney is heading for the exit, which lessens market focus. The Fed's Clarida, Williams and Kashkari are all speaking and may offer more excitement.

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