January 15 2017

Jan. 15, 2017 (Commerzbank AG) – Global economy – Sentiment better, problems over?

Brighter sentiment indicators around the world indicate that the global economy shifted up a gear at the end of 2016. But for how long? We are sceptical about prospects in China and the US; in China, structural problems are soon expected to rise up the agenda, while in the US already-high capacity utilization rates should prevent a further growth acceleration. In the euro zone too, the economy is unlikely to sustain the higher pace that emerged in recent months. That said, the gradual rise in lending shows that the stimulus from very expansionary ECB monetary policy is having a positive impact. Euro zone growth in the next two years may therefore exceed current expectations.

Further topics:

Forecast changes: stronger growth

At our monthly forecast meeting, we revised up our euro zone, German and US GDP growth forecasts. One factor behind this is the faster pace emerging for the winter half year.

ECB meeting: ECB should stay true to its line

After the December decision to extend the bond buying programme to the end of 2017, the ECB Council will adopt a waiting stance at its meeting on Thursday. It will make it clear that despite recent positive data, the Council is not planning to enter the exit phase.

Outlook for the week of 15 to 20 January

  • Economic data: In the US, we expect to see December industrial production post the largest monthly gain since May 2010, as “hard” data reflects recent sentiment indicators. Chinese GDP likely expanded strongly again in Q4 (6.7% y/y).
  • Bond market: We look for the Bund curve to steepen again and reiterate our call to reduce peripherals exposure amid the current spread tightening move.
  • FX market: Dollar investors will to wait until Mr Trump is inaugurated before they can hope to get in-depth details on his economic programme which suggests the dollar will not benefit from any tailwinds for now.
  • Equity market: 2017 EPS forecasts in European markets have enjoyed positive upward revisions of late although US markets have been less fortunate due to the recent dollar rally.
  • Commodity market: Brent oil should continue to hover around 55 USD next week although we believe this is unjustifiable in the medium term as US supply rises.


Jan. 14, 2016 (Tempus, Inc.) – The U.S. Dollar is trading in familiar ranges after losing ground throughout yesterday and overnight sessions. Stock indexes fell flat as traders start weighing divergent outlooks and political downside, as well as upside, risks. Investors are not as prone to take risks at the moment, but the Dow Jones is close to hitting 20,000 points while the greenback continues to swim around multi-year highs against most peers.

There is no major data to push further momentum, but in today’s markets anything is possible. Fed Chairwoman Janet Yellen will be speaking at a few engagements in the coming weeks prior to the January 19th meeting. We will monitor her influence, particularly at the Commonwealth Club in San Francisco on Wednesday January 18th.


The Yen has been on a tear, rising by 1.5% in the last two days. Markets starting to dwindle after being on a hot streak are starting to benefit the safe-haven asset. The Bank of Japan is slated to meet on January 19th where the bank could potentially add to their stimulus. More importantly, we want to find out if there is talk about coupling with fiscal policy as Shinzo Abe’s government rolls up its sleeves to boost growth in a much deflated country.

Also, will the Yen follow the 2016 trend of JPY appreciation after every meeting regardless of the decision? We shall see. In December, the trend switched, but the currency has stayed resilient unlike others.


Pound Sterling stopped falling, especially after Retail Sales for December revealed better-than-expected numbers. The “Hard Brexit” possibility is very real since UK lawmakers are starting to blatantly disregard any effects that leaving the European single market may bring.

Indeed, the Brits seem excited about the possibilities of working their own agreements, but ignore the potential everlasting damage of separating financial and business ties abruptly. Article 50 will likely be invoked by end of the first quarter, but now friction between the Prime Minister, the Conservative Party, and the Supreme Court will likely lead headlines in regards to the official Brexit process.