Global Themes

Mad March

  • Busy calendar starts off important month for markets 
  • President Trump speech to Congress on Tuesday
  • GBP slips on news, both new and old 

Busy Calendar

Busy calendar starts off important month for markets
PMI data from all key areas, a central bank meeting, a President's speech and numerous Fed speakers fill this week as we await the triggering of Article 50, key meetings from FOMC and MPC and the Dutch elections later in the month.

This week we have key PMI data from US, China, Europe and the UK.  We have durable goods, consumer confidence and trade balance releases from America, as well as the US Presidents speech to both houses of Congress.  Finally on Friday afternoon we have various Fed speakers including Chair Janet Yellen speaking on the outlook for the economy.  By the end of the week we will know how the world views it’s economy going forward, and how the leader and central bank of the biggest player propose to implement policy.  Over the coming weeks we have a critical FOMC meeting on 15th March and Article 50 finally, probably, being triggered. The FOMC meeting may well set the trend for the USD for the following weeks and months. The UK Government invoking Article 50 is actually the start of uncertainty rather than the end, marking the beginning of challenging negotiations without any certainty of success.

Trump Speech

President Trump speech to Congress on Tuesday
After a period without comment on policy specifics, many people will be looking for more detail on topics ranging from income and border taxes to social security and infrastructure spending.  The market has been particularly sensitive to policy promises from the new administration. 

Back in November last year, following the election of Donald Trump, the markets reaction was to buy anything dollar denominated.  His promise of stimulating the US economy and US industries as a primary focus spurred the Dollar, American equity indices and US Treasury’s to rally across the board. In recent weeks though there has been a sense that some of these policies may be more difficult, and take longer, to implement than first thought, and these markets have all either stalled or started to reverse.  Tuesday evening will be an opportunity for the new President to divulge more detail around some of these policies.  A strong speech could see the USD start to rally again, especially if it is followed by positive rhetoric from the various Fed members speaking later.  However, a speech lacking in policy detail could easily see markets sell off further.  

GBP

GBP slips on news, both new and old
The pound opened the week lower, thought to be the result of two stories. The first, the increased likelihood of a second Scottish referendum on independence, had already been reported last week.  The second is that it looks increasingly likely the House of Lords will table an amendment to the “Brexit” Bill, adding a potential delay to the process. 

The market must have somehow missed the various stories over the last few weeks suggesting that the Scots were considering another vote on independence, so when The Sunday Times ran the story that P.M. Theresa May could agree to a new Scottish vote, it seemed to be a surprise and trigger memories of the fall in GBP in June 2014, just before the previous referendum.  Also, the House of Lords debate the “Brexit” Bill this week.  It is now widely thought that the Bill will be returned to the Commons with two demands for changes, a guarantee that EU citizens will be allowed to stay in the UK after it leaves the bloc and a legally binding promise that Parliament would be given a vote on whether it accepts the outcome of the PM's negotiations. As long as Labour continue to promise not to try and stop the bill, it is unlikely the Government will be defeated and see the bill fail, although the two proposed amendments could find support in the Commons and it may need a rewriting. Any delay at this time creates uncertainty and could keep GBP anchored at lower levels.


Western Union Business Solutions has based the opinions expressed herein on information generally available to the public. Western Union Business Solutions makes no warranty concerning the accuracy of this information and specifically disclaims any liability whatsoever for any loss arising from trading decisions based on the opinions expressed and information contained herein. Such information and opinions are for general information only and are not intended to present advice with respect to matters reviewed and commented upon.

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