Markets Forecast 20.01.2017

While Donald Trump’s inauguration is nearing, the global market is awaiting how he would enact his policies over his promises to lower tax rates and increase infrastructure spending. However, during his first press conference, the lack of mention of fiscal stimulus on the USA left many businesses and analysts questioning how his policies would pan out in the long run. This is a rundown of the expected events for the upcoming trading week.

  • US Reports

Inflation data would be released Wednesday. The Federal Reserve is planning a three-rate hike for the year 2017 alone, notwithstanding President Trump’s tax revamp and increased spending on the infrastructure sector. The Consumer Price Index continually increases every year, with a 1.7% current rate.

Last week, unemployment claims rose to 247,000, still below the 300,000 mark, for the longest record. The figures are expected to stay within the range as the sentiment to a more positive job market could support more jobs and create new ones. If the figure still continues for the upcoming weeks after Trump’s official designation, then it is a good indicator of optimistic business confidence in the labor market and inclusive economic growth.

Oil prices are not panning out as the OPEC expects them to. Last week’s close indicates a continuous trend for the coming weeks, as most US refineries are operating at a capacity rate of 93.6% in order to process 17.1 million barrels of crude. Higher output is expected of the US so that inventory build-up is expected to stack up.

The US market would be closed on Monday for Martin Luther King Jr. Day while Federal Reserve Chairperson Janet Yellen is scheduled for a speech this coming Wednesday.

  • UK Reports

Mark Carney, Bank of England governor, formally announced that Brexit is the least of their worries for the stability of the UK in terms of finances. This seems like a complete 180-degree turn for him with regards to changing his narrative from past statements that British citizens would likely suffer severe consequences if the move pushes through. He is scheduled to give a speech on Monday as to the outlook of its economic domain while revising past statements. The sentiment would be true for all as a volatile market would be expected for the coming trading week.

On Tuesday, the UK Inflation data would be released. Bank of England forecasts continue to rise up to 2.7% for the year 2017, maintaining the threshold rate of 2%, good for the year 2020. The Sterling’s decline in value could catapult to higher inflation costs for clothing and petrol prices, as these would increase costs on production. These increased costs would eventually be passed on to consumers. Spending would be affected, in the meantime.

Currently, the European Central Bank keeps the interest rate for December and pushed with cutting back from 80 billion to 60 billion euro asset purchases per month. The bond-buying program intended for economic stability boost is extended until year-ending 2017. Thursday this coming week would see the decision on whether the rate would still be kept or if the program is halted.

  • Other Markets

With the fall of China’s export figures for the year 2016 after a weakening global trade, a pessimistic turn for 2017 export figures is predicted. However, despite exports falling, domestic demand consumerism is improving after the government puts economic stimuli in place to improve business trade and to push spending. Friday would be the release of Chinese figures in retail sales and GDP.

The Japanese yen is still likely to stay weak the coming week, but this would be beneficial for Japanese exporters, particularly when the US dollar is converted to denomination currency. The earnings for the Japanese economy is seen to rise, backed by the Bank of Japan’s policy to stay intact as the country pursues positive opportunities from the weak currency.