As we are heading towards 2020 it is valuable to have a look at the bigger picture.
USA: President Trump will head to the general elections having been officially impeached by the House, and most probably saved by the Republican controlled Senate. The FED could declare that it is aiming 2% symmetric inflation target throughout the whole business cycle.
Japan: 2020 does not include a scheduled consumption tax increase or general elections. The BOJ is continuing its aggressive monetary expansion up until it succeeds the 2% inflation target.
Europe: The ECB will run through a Strategic Review that could probably result in expanding its price stability mandate, so that it includes an employment target. German manufacturing activity gave the impression that it has bottomed up. Yet the latest readings are pointing to further contraction. The new leaders of the SPD could push for the much needed fiscal spending. France is ending 2019 in a similar way as 2018. On 2018 the Yellow Vests movement was triggered by a new tax on oil. Now, France is on strike against the proposed pension plan reforms. Italy is heading to regional elections on the 26th of January. Next general elections are scheduled in 3 years from now.
UK: Disappointing macro releases and wishful consecutive new deals are in the menu.
Global Trade: A new modus operandi for USA-China trading has been expected since May 2019. A very limited part of tariffs have been waved on December 2019. Phase 2 deal is expected after the November 2020 presidential elections. USA-EU: The probability of additional tariffs on EU goods exists. During 2019, the WTO ruled against Airbus. The ruling against Boeing that is expected on March, could be delayed due to the USA’s well played catenaccio.
The near term horizon includes:
- the increasing tension in Libya. The government is supported by Turkey, and Haftar forces are protected by Russia, Egypt, UAE, Jordan and Sudan
- the upcoming elections (January 11) in Taiwan.
Macro releases: Today’s economic calendar is almost empty.
Disclaimer
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