Trump volatility begins, with weaker Oil, MXN and CAD as Gold rises

• Trump volatility begins, with weaker oil, MXN and CAD as Gold rises.

• UK wage growth remains stubbornly high.

• All eyes on CPI data and Netflix earnings.

A mixed start in Europe today as traders weigh up the outlook as we enter a new four-year period of Trumpenomics. Once again, Trump appears to care little for who are perceived to be allies or foes, with Canadian and Mexican currencies hit hard off the back of his claim that the US may impose a 25% tariff of their exports from 1 February. So much for the plan to raise tariffs by 2% per month. However, the Chinese markets clearly felt more optimistic, with Trump’s decision to reinstate TikTok followed up by a lack of any mention around tariffs on Chinese imports. For now anyway. We have seen a notable divergence between gold and oil as Trump declared a national energy emergency that could see the country dramatically increase oil & gas production. The hope is that this push for higher oil output will curb inflation and allow for greater easing from the Federal Reserve, with gold pushing into a two-month high as a result.

The latest UK jobs report provided a somewhat disappointing read at Threadneedle street, with expectations of a sharp decline in wage growth ultimately failing to come to fruition. A stronger-than-expected average earnings figure of 5.6% highlights the continued struggle driving down inflation, while the higher unemployment rate once again brings the word stagflation to the fore. While the US stands in a position to potentially see inflation rise off the back of economic strength, the UK faces the possibility that factors such as a weak pound, higher NI contributions or a rise in the minimum wage pushes up prices at the same time as the economy struggles.

Looking ahead, inflation remains a key concern, with Canadian and New Zealand CPI both due. With price pressures expected to fade further for both countries, it looks likely that we see both the BoC and RBNZ ease further in the months ahead. However, the US markets will be looking out for the belated response to yesterday’s comments from Trump, while Netflix earnings should provide a central focus for equity traders.