Donald Trump made news last week when announcing his framework for a deal involving a mysterious agreement on an Arctic island. The specifics of this agreement remain murky. What is particularly difficult about this announcement is that it comes at a time when the U.S. economy is experiencing unprecedented growth. That’s significant growth, the highest in the current quarter, with GDP now at an annualized pace of 4.3%. This is a significant jump from last quarter’s 3.8%. This optimistic economic momentum should help as we steer discussions to a brighter, innovative future, especially when making the case for international agreements.
In his address to the World Economic Forum in Davos, that was at least partially intentional, Trump sought to soften his message on the EU. This was a big change in his strategy. He dropped the threat of imposing new tariffs on European countries. This indicates that he is opening the door to a less confrontational discussion. This step can be seen as an indication that he hopes to reduce the rifts that have defined U.S.-EU relations over the last several years.
Trump himself has recently contradicted his plan to annex Greenland. In a much clearer geopolitical message, he expressly excluded military intervention with any NATO allies. He focused on his respect for diplomatic approaches over military moves.
As the effects and costs of those policies become clearer, attention is understandably turning back to macroeconomic concerns. The U.S. PCE Price Index numbers for October and November will be out shortly. Analysts are expecting these badly needed inflationary reprieve numbers to confirm persistent inflationary pressures still running extraordinarily hot above the Federal Reserve’s 2% target. This new, possible inflationary trend may portend greater ramifications on the future course of monetary policy and market expectations.
The currency market continues to see major moves, with the U.S. Dollar Index (DXY) 0.65% lower on the week thus far. Despite this tough backdrop spurred on by remarkable developments outside the loop, the index was able to bounce back on Tuesday, showing some impressive resilience. A heat map displaying percentage changes of major currencies against each other highlights these fluctuations, while a table provides detailed information on the percentage changes of key currencies, including USD, EUR, GBP, JPY, CAD, AUD, NZD, and CHF.
As these critical economic indicators and geopolitical developments play out in parallel, investors and analysts evaporating on both sides of the Atlantic are watching intently. The dynamic between Trump’s pronouncements and more general economic data is sure to affect market mood over the next few weeks.