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In a heavyweight bout between Senate Democrats and Republicans over spending and immigration, no outright winner was crowned. Disagreements over the so-called ‘Dreamers’ programme ended with both sides walking away from a temporary government funding bill.
As a result, the US Government has been shutdown for the first time since 2013, leaving hundreds of thousands of government employees without pay, and halting the lawmaking process of the country’s highest institution.
Unsurprisingly, this has seen the US dollar start the new week on the back foot. Uncertainty over how long the shutdown will last – the 2013 shutdown lasted for 17 days before being successfully resolved, while plans are for a Senate vote this evening at 5pm – will be in driving sentiment for the dollar.
A quick resolution will see uncertainty abate, and could see the dollar avoid trading fresh 3-year lows, although a protracted shutdown could see last week’s lows surpassed.
The unrest in Washington DC has put President Trump in a tricky position, and not just because thousands of White House employees will be staying at home today.
The US President was due to make his first trip to the World Economic Forum in Davos, the elite event attended by world leaders, central bankers and CEOs alike. The week-long event will events on subjects such as trade, security, globalisation and the environment, however may be more closely watched for interactions between world leaders – most notably President Trump and UK Prime Minister Theresa May should the US leader choose to attend the meeting – as well as any policy hints dropped by global central bankers in speeches throughout the week.
Against the backdrop of Davos, the European Central Bank (ECB) meet on Thursday to discuss monetary policy.
Newswires were awash last week with talk that the ECB were debating changing policy language in an upcoming, in what many assume would be the next stage of the tapering of its vast Quantitative Easing (QE) programme, however the Bank has taken measures to ease back some of the hawkishness in recent days.
All eyes will now be on Thursday’s decision and subsequent presser from President Mario Draghi for any hint as to a change in thinking at the institution. Any hawkish change in tone could see the Euro return to its highs, while further playing down of policy changes could hurt sentiment.
For the UK, this week sees a multitude of major macroeconomic data releases.
On Tuesday, Public Finances (9:30am) and CBI Orders & Prices (11am) data will warm up for Wednesday’s Unemployment & Wage data release (9:30am). The latter, in particular, will be in focus as inflation remains around 3%, while wages remain stuck around 2.5%. In fact, November’s print is expected unchanged on October’s 9-month high of 2.5%, which would represent a worsening of consumer finances (vs. 3.1% inflation in the same month), despite inflation easing in December.
But it doesn’t end there. On Friday, the first reading of UK Q4 GDP is released (9:30am), with the consensus forecast (1.4%) pointing towards an extension of the retreat from Q1 highs (2.1%) and at its lowest level since Q2 2012.
This precedes the equivalent US Q4 GDP print (1:30pm), which is also expected lower, albeit marginally and from a 20-year high (3% exp. vs. 3.2% prev).
Other macro data releases of note this week include German and Eurozone ZEW Surveys (Tuesday; 10am), the US Richmond Fed Manufacturing Index (Tues; 3pm), Eurozone Consumer Confidence (Tues; 3pm), a range of Eurozone PMI Manufacturing & Services (Wednesday; 8-9am), US House Prices (Weds; 2pm), US PMI Manufacturing & Services (Weds; 2:45pm), US Existing Home Sales (Weds; 3pm), German IFO Surveys (Thursday; 9am), UK BBA Home Loans (Thurs; 9:30am), UK CBI Sales (Thurs; 11am), and US New Home Sales & Leading Index (Thurs; 3pm).
Key data this week (Sign up here to receive our daily live macro-calendar)
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UK Economic Announcements
09:30 Public Finances
11:00 CBI Orders, Prices
Intl Economic Announcements
10:00 ZEW Surveys (Germany, Eurozone)
15:00 Richmond Fed (US) & Consumer Confidence (Eurozone)
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UK Economic Announcements
09:30 Unemployment, Wages
Intl Economic Announcements
8-9am PMI Manufacturing & Services (Eurozone)
14:00 House Prices (US)
14:45 PMI Manufacturing & Services (US)
15:00 Existing Home Sales (US)
15:30 Oil inventories (US)
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UK Economic Announcements
09:30 BBA Home Loans
11:00 CBI Sales
Intl Economic Announcements
09:00 IFO Surveys (Germany)
12:45 ECB Policy decision (Eurozone)
15:00 New Home Sales, Leading Index (US)
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UK Economic Announcements
09:30 GDP, Index of Services
Intl Economic Announcements
01:30 Industrial Profits (China)
13:30 GDP, Durable Goods, Inflation (US)
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