Last week, the Democratic and Republican parties failed to reach a final agreement in the government budget discussions that caused the US government shutdown from January 19th to January 22nd, 2018. The Democrats demanded that the budget plan could include the budget for the illegal immigrant protection program that was threatened to be deported, which most of them come from Mexico and Central America.
Meanwhile, The US government imposed a new policy on high import tariffs for washing machines and solar panels and this could lead to a larger trade war between the US and China. For large size household washers will be subjected to 20% import tariffs for the first year and 50% for machines above that size. As for the solar panels, it will be subjected to 30% import tariffs for the first year and will fall to 15% in the fourth year.
Last week US economic data that was released mostly negative. The negative data can be seen from US’s Richmond Fed Manufacturing Index for the month of January was decreased to 14, US’s House Price Index MoM for the month of November was decreased by 0,20%, US’s Markit Services PMI for the month of January was decreased to 53,30, US’s New Home Sales MoM for the month of December was decreased by 9,30% and US’s Wholesale Inventories MoM for the month of December was decreased by 0,50%.
USD is not Fully Avoiding the Government Shutdown
President Trump has signed a temporary spending bill that will last until 8 February – meaning that immigration and spending bill will still be in talks. The Congress also has to have a whole permanent spending deal for 2018 before the February deadline, include the defense and domestic spending, unless the USD will once again threat by Government shutdown possibilities. Meanwhile, President Trump is expected to deliver a speech titled “The State of the Union Address” in DC on Wednesday
FOMC Meeting and Statement
This week FOMC Statement will be the last statement deliver by Janet Yellen before stepping down and expected to be unchanged from the previous meeting. Based on CME Group FedWatch tool, the Fed is expected to hold the rate and will raise the U.S interest rate on the March meeting. Besides FOMC Meeting, the tier-1 U.S employment data, including the Non-Farm Payroll, Average Hourly Earnings, and Unemployment rate, will be released this week and the majority expectations show optimism over U.S employment data.