Trump lashes out at US central bank - again [Video]

Today's Highlights

  • Theresa May confirms Brexit deal debate to continue in January

  • No confidence knocks Pound

  • Data diary: Eyes on Europe

 

Current Market Overview

There have been continuous sound bites from President Trump’s administration against Federal Reserve interest rate hikes. White House trade advisor, Peter Navarro, said that the Federal Reserve should not raise rates, even this week. He said it’s “not because the economy’s slowing down, but because the economy’s growing without inflation”.

President Trump also criticised the Federal Reserve for “even considering yet another interest rate hike”. However, the fact that the US Dollar and yields are weak argues that the fall in the stock market is due to fundamental challenges facing the US economy. And there has been significant flows from stocks to bonds in the US, Germany and Japan. It is clear that investors are increasingly worried about a global slowdown.

Theresa May confirms Brexit deal debate to continue in January

In the UK, Prime Minister, Theresa May, told the UK Parliament yesterday that her Brexit agreement is “not everyone’s perfect deal” but a “compromise”. However, she warned that “if we let the perfect deal be the enemy of the good then we risk leaving the EU with no deal”.

Mrs. May emphasised that “avoiding no deal is only possible if we can reach an agreement or if we abandon Brexit entirely.” She also repeated that the EU had offered further clarifications on the Irish backstop and she’s seeking further political and legal assurances.

On the timing of the vote, the Prime Minister said that debate on the Brexit deal will resume week beginning Monday 7th January. The vote will be held in the following week, that is, the week beginning 14th January.

No confidence knocks Pound

Leader of the opposition Labour party, Jeremy Corbyn, lodged a motion of no-confidence in May for delaying the Brexit deal vote as “unacceptable in any way whatsoever”. Corbyn also criticised May as the architect of a constitutional crisis, “leading the most shambolic and chaotic government in modern British history”. But the results of such a vote would be non-binding, even if it were to take place. It is difficult to imagine how the Pound will rally in any meaningful manner, given the current uncertainty.

Data diary: Eyes on Europe

Looking ahead, the German IFO business climate report is the main focus this morning. Later in the day, Canada will release manufacturing sales figures, the US will release Housing Starts and Building Permits.

Markets tread water until mid-week central bank activity

Markets are likely to remain in a holding pattern ahead of the Federal Open Market Committee (FOMC) rate decision on Wednesday evening and the Bank of England’s (BoE) meeting on Thursday.

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.