Introducing President Trump

The Day So Far

Starting off with the overnight session and for the first time in two years the Chinese economy saw an uptick in growth over the Q4 2016 period, rising to 6.8% Y/Y. This might not sound a lot but in combination with the debut speech from the Chinese President at the World Economic Forum I can’t help but feel that while the world remains focused on the US there is an distinct and on-going sea change in China’s approach that echoes a more conciliatory tone aligned with liberalising their views to fulfil their global trade ambition. This of course comes at a time when the US are about to swear in their 45th President who’s main political agenda is filled with protectionist policies in making ‘America Great Again’. I think the Trump slogan speaks volumes and to me is the perfect admission that America’s global influence is on the decline. All I know is that my 7yr old godson Finlay, who leaves in a town with a population of no more than 3,000 people on the South Coast of England is now learning mandarin at School – now that is what I call prudent planning for what the future holds!

Anyway back to markets and the main event that spooked GBP was a shockingly bad UK retail sales number for the month of December, which at a fall of 1.9% M/M marks the biggest decline since April 2012 and was the joint 3rd largest fall in the last two decades. Despite the doomsday statistics I actually believe that this information is somewhat backward looking and after retailer Next issued their profit warning just a few weeks ago I find it hardly surprising that clothing and foot ware sales were down 3.7% over the survey period. The bigger issue here for the daily view is the USD and how it reacts to the inaugural address scheduled for 5pm London time. Unlike the last press conference I do not expect a re-run of the horror show that occurred where Trump was seemingly obsessed in putting to bed various allegations of his showing techniques. This I feel will likely be a well telegraphed and formal speech despite reports that he wrote it himself. As such, with no new negative news flow of late, and no Q&A session with the press, it means that probabilities of a throw away comment are substantially reduced.

The Day Ahead

The USD has already started to strengthen over the last few hours and this fits with my view that his speech will be USD positive today, as such we look at a short in EUR/USD and given the strong advance of cable this week, coupled with the weak UK retail sales report earlier, I don’t think it will take much for GBP/USD to come under some further pressure. Meanwhile our view on other assets remains the same with our sole long being seen in the S&P.