Good morning,

Guess who’s back?

President Trump’s press conference yesterday was a return to the policies and performance aesthetics of his candidacy. Accusations and grandstanding apart, the performance offered us little substance on any economic matters more than he has already told us. If candidate Trump returns to the podium continually while a Congress works to enact tax reform then the relationship between the two are all important. He needs Congress to build stuff but he does not need them to start tearing things down.

Reports from Washington that the Ryan tax plan, led by Speaker of the House Paul Ryan, is in trouble have increased in recent days as opposition within the Republican Party to measures that would increase border taxes on imports and exports are part of the bill. Someone seems to have told these Senators that it will not be the Mexicans or the Chinese or Canadians or whoever paying the taxes but the average American consumer.

Without this proposal a lot of the tax plan looks inviable from a budgetary point of view and therein lies a big defeat for the Trump Administration straight out the gate.

Dollar doing well considering

The dollar remains a little bit weaker on the week following its inability to rally following further strong data from the US economy. Inflation could be eroding wages, there are some doubts about the sustainability of the growth model as it stands and the politics in Washington are front page news for all the wrong reasons; I’m surprised the dollar isn’t lower!

Euro allowed to run despite politics

The euro is continuing to press on against a Trump-addled greenback and a pound that entered this week looking for a rest but is instead lower following weaker inflation and poorer wages. We do expect pressure to increase on the euro in the coming weeks as the ins and outs of the Dutch elections become clear. We believe the Dutch elections and the ensuing uncertainty surrounding the ability of a government to be quickly or easily formed at a critical juncture for the European Union represents a real risk for the euro in the early part of 2017.

While the media and commentariat have chosen to focus on the French elections and the cartoon villainy of Marine Le Pen, there is a good chance that her own success is contingent on a victory for the PVV party in Holland, and this will become increasingly priced into the single currency between the Dutch elections in March and the first round of the French elections in April.

Our webinar on the subject is this Wednesday and you can register to join us through the banner at the top of this email or by clicking here.

How strong are UK consumers?

As we noted yesterday, today allows us a look at the retail sales picture here in the UK wherein the real second round effects of Brexit are likely to be felt. Consumer credit grew at its slowest rate in January for over two and a half years in a sign that consumers are starting to pull in their horns. Sales dipped in December; consumers buying in November, taking advantage of Black Friday discounting seems likely but will they have remained weak in January?

Of course, one argument could be that consumers will continue to shop ahead of anticipated price increases. We’ll find out at 09.30 this morning.

Elsewhere, the data calendar is rather quiet.

Have a great day and a better weekend

Click here for live rates