Today’s “off the wall” (pun intended) trade idea? – buy avocado futures! (More on Mexico below)
Later today President Trump and U.K. Prime Minister Theresa May will meet in Washington.
There will be a press conference following the meeting at which Trump is sure to praise and encourage the U.K.’s efforts over Brexit. He is also likely to take the opportunity to bash the EU much to the chagrin of Merkel, Junker et al.
Yesterday saw the release of Q4 GDP data in the U.K which showed that the inflationary effect of the weaker pound and a perceived slowdown in consumer spending is yet to have any effect on growth.
Sterling continues its recovery. Its performance since the Brexit vote could be characterized as “taking the lift down and is taking the stairs back up!”
The pound has recovered 5% of the “flash crash” Brexit fall against the dollar and continues to be steady against the Euro.
Next week sees “Super Thursday in the U.K. when the Bank of England will issue its Quarterly Inflation Report and the MPC will make its decision on interest rates. Bank of England Governor Mark Carney has already stated that the Bank are watchful and will act pre-emptively should inflation start to increase “outside the normal cycle”.
Mar. Carney has already announced his intention to leave his position in June 2019. Whilst he hasn’t, as yet, taken on the almost mythical status of a Greenspan or Bernanke he was certainly the right man in the right place to steer than Bank of England into calmer waters following the debt crisis.
It is to be hoped that his successor is already being groomed with the departure coming at a critical juncture in Brexit. The U.K. will need to be careful not to become “Manchester United after the departure of Sir Alex Ferguson!”
Later today (1.30GMT) sees the release of Q4 GDP data in the U.S.
This is expected to see a healthy increase from 1.4% in Q3 to 2.1%. Economic activity continues to pick up in the U.S. Jobless figures are at the level which equate to “full employment” below 5%. The dollar index has fallen (slightly) every week since the turn of the year and we could see the uptrend recommence should this data surprise at all to the upside.
President Trump has done pretty much all he can other than to “invoke the Spirit of the Alamo” upset Mexico over the past week or so. It seems the wall will be built but the question remains “who will pay for it?
80% of Mexico’s exports are to the United States. America has an eighty billion dollar trade deficit with Mexico. To a certain extent, they need each other but the onus is on Mexico as President Trump is well aware!
A 20% tax on Mexican imports is a double edged sword. It will pass the burden onto the U.S. consumer but could also drive importers of Mexican goods to look elsewhere to source product.