Markets are beginning to experience a shift in sentiment as we see traders get slightly nervous on the back of mounting uncertainty out of the USA. The uncertainty is largely based on political factors, with the president elect Donald Trump, set to officially be sworn in on the 17 January, being the target of aggressive scrutiny and attacks to his character and loyalty to the USA with allegations of collusion with Russia on rigging the elections and his lack of commenting on fiscal and economic matters weighing on optimism.
This said, one would expect a far greater impact from these factors but it would seem that markets are hopeful as much as they are uncertain as relatively positive economic data keep the fears in check. Today’s key data will be a defining moment, indicating whether markets will remain optimistic and buck the trend of uncertainty as we see a host of figures being released out of the US.
The data covers information regarding Retail sales, Producers Price Index and confidence sentiment in the form of the Prelim UoM Consumer Sentiment. The figures are expected at 0.5%, 0.1% and 98.6 respectively.
Better than expected retail sales and consumer confidence figures will imply that economic agents are positive regarding the outlook of the economy and are willing to spend money now instead of saving it for a rainy day while a better than expected producer prices will imply that inflation might be on the rise as demand picks up. All these factors will imply that the FED`s recent bullishness is warranted, which would result in a strengthening of the USD and US equities. On the other hand, worse than expected data will see the USD and US equities tumble as inflation expectations are revised lower, placing further rate hikes in peril.
One thing is for certain, whatever the release, we are likely to see market adjustment which will likely carry us into next week setting the new landscape as bulls and bears fight for a new equilibrium.