Two key political events on either side of the Atlantic have raised the temperature for the pound and the US dollar. Last night, it was President Trump’s state of the union address to Congress that caught the attention of markets. Tomorrow, focus will shift to the slightly less salubrious surrounds of Gorton & Denton, a traditionally Labour enclave projected to issue the prime minister a sharp rebuke.
It would be hard to describe President Trump’s remarks as conciliatory. After his tariff agenda was knocked back by the Supreme Court to end last week, he instead cut a defiant figure, railing against his adversaries and tktk.
Already a little anxious about a potential conflict with Iran, markets are unlikely to be reassured by the address. The president warned that Iran’s ‘sinister’ nuclear ambitions would soon threaten the United States amid a massive buildup in the American military presence in the region.
Economic news is slightly sparse this week, but there was still time for the Bank of England’s Andrew Bailey to appear in front of a parliamentary committee. Governor Bailey suggested headline inflation would continue to fall sharply, and although markets continue to expect a cut in March, core and services data indicated there were some sticky price pressures to navigate.
This morning, we heard that consumer confidence in Germany came in below expectations heading into March, as measured by the GfK report. Economic expectations and willingness to buy fell significantly from the prior as the desire to save rose to a record high.
The Japanese yen will be in the spotlight for the remainder of this week. That’s because reports are circulating that Sanae Takaichi, fresh from her resounding victory in the snap general election, voiced her opposition to interest rate hikes to Bank of Japan governor Ueda. The yen came under further pressure this morning after the prime minister nominated two dovish candidates for positions within the central bank.
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