The surge in equities this past week fizzled out, with markets gasping for breath, following a huge week of fundamental change following Trump’s inauguration. Trump appeared by ‘Videolink’ at Davos and set another fox into the henhouse. He reiterated that tariffs were coming if trade imbalances were not fixed. Europe can either seek a balance or suffer tariff impositions. Trump also made plain he does not have much respect for Central Bank independence and called for global interest rates to fall, and oil prices to tumble. His focus has been mainly on domestic matters, where he has promised deregulation and tax cuts, which have impressed markets. The US Dollar’s safety play has taken a back seat, with the EUR surging above 1.0500, while the GBP jumped to 1.2500.The Bank of Japan recognised the sharp rise in inflation, the latest reading reaching 3%, raising interest rates by 25 basis points to 1% and boosting the Yen. The weaker reserve enabled the commodity currencies to bloom, with the AUD breaking above 0.6300, while the NZD pushed back to 0.5700. This coming week sees a plethora of economic data releases, with inflation and growth readings from across Europe and North America. The Fed, the Bank of Canada and the ECB are all meeting to decide interest rates this coming week. The focus will be on the Fed who were expected to hold rates unchanged but have been publicly called out by Trump. Will the Fed cave to the unstoppable force?
