I do not think the economy really needs to outperform to make the Federal Reserve raise rates. If the economy evolves as expected, the Fed will be hiking interest rates.
At the moment, it is hard to say whether the energy industry is really going to surge forward thanks to Trump's regulations. Still, with relatively low oil prices, the industry is not going to receive more money regardless of any regulations the President might implement.
I do share this point of view because there is a strong negative correlation between real interest rates and the gold price.
I would not say that they are completely indifferent. The Business Climate Index did show an initial reaction to the Brexit referendum decision back in the middle of 2016; however, despite the political uncertainties, the overall global demand picture has actually brightened up over the last six to nine months.
To my mind, it is reasonable to believe that the ECB will proceed with the withdrawal from the loose monetary policy.
I think that there is a risk that Trump's policies could hurt economic growth in case there is an aggressive action on trade.
We think that growth will soften a little bit over the course of this year.
I do share this point of view, because, clearly, the US economy is at a different stage of the business cycle than the Canadian economy is.
I suppose that the current trend in consumer prices will improve in the nearest future; however, this improvement will be relatively modest given the fact that the base effect of oil price and the Euro exchange rate are not expected to rise a lot.
I assume that the US Dollar performance is going to be all about Trump and prospects for a big fiscal stimulus in the United States.
We think that the current range is what we are going to see through the first quarter. However, around March, supposedly, the Euro could dip a little bit closer to the parity level. At this point, we are looking at a fairly narrow range of 1.02-1.07 during the Q1.
At Societe Generale, we were expecting the Cable to move to 1.20 by the end of the first quarter, though it seems now that it had definitely reached the abovementioned level much faster than our prediction.
I believe that it will not have any impact on the widely anticipated rate hike by the US Central bank.
Traditionally, small and medium enterprises have not been as active in terms of exporting; however, the potential exists.
At a 0.5% rate, the preliminary estimate of the third quarter GDP represents a deceleration after the 0.7% increase in Q2.
There has been a good indication of the psychological 100.00 level holding in USD/JPY and recent Bank of Japan communication indicates a strong commitment from the Central bank to ease monetary policy as necessary.
In my opinion, it depends on how you define the positive trend. Prices returned to pre-Brexit levels as the degree of awareness for the risks and the risk aversion returned to the previous marks.
At this point I would argue with analysts, because we think that it is actually likely that the Central bank will end up quite close to the 4% inflation target next year.
More persistent weakness in employment would signal something worse, so we would have to judge the strength of the number against those views.
I do have another rate cut in my forecast for October, which I would say is quite likely; however, I am an outlier in that, as I am probably the only one calling for a rate cut this year.
My base case scenario is that I do not expect them to announce anything at the meeting between OPEC and non-OPEC producers in Algeria this week.
We do think UK inflation is going to rise quite sharply at the end of this year and then through most of 2017.
We expect one rate hike from the Federal Reserve this year in December and two more next year, the first in June and the second in December of the next year.
I think the likelihood of a rate cut could be as high as 40%; however, I would caution that it is more a question of not oil prices or the level of the currency, but actually the weakness in the non-energy exports sector, which is the biggest concern for the Bank of Canada at the moment.