The Republican party finds itself amidst internal disagreements over former President Donald Trump's executive orders as he makes his return to the White House. This has sent ripples across the trading environment, with rumors suggesting up to 100 separate orders potentially covering tariffs, immigration, and regulation. Trump's election victory has revived inflation concerns, bringing them back to the forefront of market discussions.
As the financial world braces for Trump's re-entry, analysts from Danske Bank are observing the unfolding events with calculated detachment. They are prohibited from investing in securities within their research sectors, ensuring their evaluations remain impartial. The bond market, which experienced a sell-off, has stabilized ahead of Trump's inauguration, a sign of cautious optimism among investors.
Adding to this complex economic scenario, the latest December Consumer Price Index (CPI) data is due for release just before a key monetary policy decision. This week is expected to be relatively quiet in terms of macroeconomic data, providing some respite amid the political shifts. Meanwhile, December's core inflation data in the US came in softer than anticipated, reporting a +0.2% month-on-month seasonally adjusted increase, down from November's +0.3%.
In international markets, the Bank of Japan is poised to raise rates by 25 basis points on Friday morning. This move aligns with the generally dovish market pricing views held by most analysts at Danske Bank. Additionally, economic indicators such as the January Flash Purchasing Managers' Index (PMI) are set for release on Friday. Projections suggest a recovery in the euro area composite index to 50.0, indicating a potential stabilization in economic activity.
The governance of Gaza remains an uncertain factor that could influence geopolitical stability and market sentiments. Meanwhile, Danske Bank has revised its forecasts for bond yields, predicting a 10-year Bund yield at 2.25% over a 12-month horizon and a 10-year U.S. Treasury yield at 4.20%. These updates reflect cautious adjustments in response to evolving economic conditions.
In commodity markets, the strengthening U.S. dollar has exerted downward pressure on gold prices, nudging them back towards the $2,700 per troy ounce region. This daily improvement in the Greenback highlights the ongoing volatility and investor sentiment shifts driven by political developments.