The Week Ahead

The Week Ahead

Early look at Trump administration. UK inflation climb to underpin pound rally. US data shows reaction to election. UN climate conference in Marrakech. Haitians elect new president. All in The Week Ahead.

Donald Trump begins to fill administration positions

The incoming Trump administration will spend the week trying to fill thousands of top government positions. These include White House aides, cabinet secretaries, and other high ranking officials dealing with both domestic and foreign policy.

Reaction to Trump’s picks so far has been mixed: A decision on White House chief of staff broke yesterday with Trump selecting Reince Priebus, the RNC chairman. Priebus beat out Stephen Bannon, chairman of Breitbart News and Trump campaign chief executive officer, who was the other leading candidate for the position. The Priebus selection is viewed as a more conciliatory move, suggesting Trump may tack toward the center and try to work closely with establishment politicians. However, Bannon has been appointed senior counsel and West Wing chief strategist, a powerful position in the White House (roughly comparable to the role Karl Rove played in the Bush administration), alarming those hoping Trump would move away from the divisive, hardline rhetoric that marked his campaign.

With regard to political risk, the key positions to watch are Secretary of State, Treasury Secretary, United States Trade Representative, Secretary of Defense, and Secretary of Commerce. Mainstream, establishment names as well as very conservative names have been floated for each position.

UK inflation likely to jump to two-year high

Pound traders will be relieved to find some of the currency’s rally against the dollar over the past week underpinned by higher inflation and a stronger economy. When the Bank of England publishes CPI figures on Tuesday the index is expected to have climbed to 1.2 percent in the year to October, up from 1 percent the month before. The Bank raised its forecasts for inflation and growth this month, citing better-than-expected recovery from the Brexit vote.

The pound dropped by about 6 percent against the dollar over the past month amid speculation of a hard Brexit decision, only to rally against all major currencies since the UK High Court ruling on 3 November. The Court ruled that the UK parliament must vote, removing the option of unilateral action by the May government. The government is likely to appeal to the Supreme Court.

Markets will now be looking for evidence of a more resilient economy and accelerating inflation to support further recovery of the pound, with shorts betting another round of weakning should data fail expectations. The pound is still down 15 percent against the dollar since the June Brexit referendum.

Pressure will mount on Bank of England govenor Mark Carney, however, as many economists expect inflation to overshoot the Bank’s 2 percent target in 2017 and 2018. Mr. Carney has shown a more hawkish approach in commenting that the Bank could move interest rates in either direction in an attempt to support growth while the UK economy responds to the effects of the Brexit vote.


New economic data to show initial reaction to U.S. election results

Equity markets have been calmer than expected since the U.S. election was announced for Trump. However, on Thursday, important new data will be released that gives an initial glimpse into the economic impact of Trump’s victory. Specifically, weekly jobless claims will be released at 8:30am EST and the Bloomberg Consumer Comfort Index will be released at 9:45am EST.

With significant uncertainty surrounding Trump’s plans on taxes, trade, spending, healthcare, immigration and more, these indicators will provide an important first look at how consumers and businesses are reacting to the election. Of course an initial reaction is not necessarily indicative of long term trends. Nonetheless, investors should watch these metrics carefully for early clues.


Climate negotiators get to work following Paris Agreement ratification

World leaders and climate negotiators will continue the UN Conference of the Parties (COP22) in Marrakech, Morocco until Friday. They seek to work out the logistics of implementing the Paris Agreement reached less than a year ago in December 2015.

The question is whether they can maintain momentum in the more technical negotiations, when participating countries have to specify the how, where and at what cost. Expectations for a globally coordinated effort to curb green house gas emissions rose considerably when the threshold for countries ratifying the Paris Agreement was reached on 5 October. The agreement entered into force on 4 November.

Key issues to clear before emissions cuts can be implemented in full are a unified system of reporting on countries’ carbon emissions, as reports tend to be irregular. That system will allow improved tracking of the Nationally Determined Contributions (NDCs) – goals for countries’ voluntary contributions to the overall Paris Agreement target. At the top of that list, however, will be how to ensure transfer of technology and financing to equalise the uneven distribution of climate change effects across the world in transitioning to more green economies.

While technical talks and ‘getting-down-to-business’ COPs rarely maintain momentum of their  glamorous goal-defining predecessors, the Paris Agreement surprised in both its scope and in countries’ support.

Also key to watch will be the future position of the U.S.: president-elect Trump has said he would like to withdraw from the Paris Agreement and is reportedly looking at how to do so. The US is the world’s second biggest greenhouse gas emitter, making up around 15% of global emissions. While other countries, notably China, have stated their continued support for the Paris Agreement in light of the election, a pullout from the U.S. would be a strong blow to efforts to meet the Agreement’s targets.


Haiti holds hurricane-postponed presidential election

On Sunday, Haiti will hold its long-anticipated presidential election. The election was originally scheduled for October 9th, but was delayed due to significant damage from Hurricane Matthew.

Haiti’s presidential election has already been postponed multiple times and the current interim president, Jocelerme Privert, has been in office longer than his official mandate allows.

The election is a first round election. If a run-off, second round election is needed it would be held early next year. The election could prove pivotal for a country that has been battered by a spate of natural disasters in recent years and is struggling to regain its footing economically.

Last year’s elections were cancelled after mass protests and allegations of widespread fraud. The ability to conduct a fair and transparent election will be crucial to the island nation’s political stability.


The Week Ahead provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, The Week Ahead presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.

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