Weekly Outlook Ending on 21th January 2017

Currencies:
U.S dollar remain neutral after inaugural notes.
The dollar remain neutral against a basket of currencies on Friday as Donald Trump became the 45th president of the United States and used his inaugural speech to hit populist themes on halting off-shoring of work that have raised concerns of a trade war with leading manufacturing exporters such as China. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, dropped 0.31% to 100.79. USD/JPY changed hands at 114.59, down 0.24% after the speech and market close, while GBP/USD rose 0.23% to 1.2374 as the United Kingdom prepares to exit the European Union trade bloc and strike stronger trade ties to the U.S."From this moment on, it's going to be America First," Trump said. "Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength. "Earlier, the dollar pulled back from session highs against the other major’s currencies sparked by comments Thursday from Fed Chair Janet Yellen that the central bank should continue to raise interest rates, but slowly. Speaking at a conference in San Francisco, Yellen said that "allowing the economy to run markedly and persistently ‘hot’ would be risky and unwise," before adding: "I consider it prudent to adjust the stance of monetary policy gradually over time. "Earlier, the pound had weakened after the U.K. Office for National Statistics said on Friday that retail sales declined 1.9% in December, confounding expectations for a 0.1% slip. Retail sales fell 0.1% in November, whose figure was revised from a previously estimated 0.2% rise.
Euro gains on ECB Interest rate Hold.
The euro gains against the dollar on after European Central Bank President Mario Draghi downplayed the significance of the jump in euro area inflation in December. Speaking at the bank’s post-policy meeting press conference, Draghi played down the significance of the jump in euro area inflation in December, saying that underlying inflation pressure remains “subdued.” The annual rate of inflation in the euro area rose to 1.1% last month, the highest rate in more than three years. The increase in inflation was mainly driven by energy prices and Draghi said the ECB would be monitoring whether rises in energy prices feed through to other prices. He acknowledged that the growth outlook for the euro area has improved, but reiterated that quantitative easing can be increased if the outlook becomes less favorable. He said that risks to euro area growth outlook remain tilted to downside due to global factors, adding that the outcome of the economic analysis "confirmed the need for the continued, very substantial degree of monetary accommodation." At Thursday's meeting, the ECB kept its overnight deposit rate steady at -0.40%.The main refinancing rate was unchanged at zero, while the rate on the marginal lending facility stayed at 0.25%.
Pound gains on Mays speech and turn lower on weak Retail sales.
Sterling rallied on track for its largest one day gain since 2008 after British Prime Minister Theresa May said the U.K. was looking for a Brexit deal which would benefit both sides. GBP/USD jumped 2.33% to 1.2328, rebounding from the low of 1.1985 hit on Monday, which was the weakest level since October’s flash crash. It was the largest one-day gain in the pair since June 20 last year, just ahead of the referendum and the second biggest since December 2008.In a speech in London, May confirmed that Britain will be leaving the single market, but said it would seek a bold, ambitious trade agreement with the EU. She said an important part of the new relationship will be “the greatest possible access to the single market on a fully reciprocal basis”.

The pound turned lower against the U.S. dollar after the release of weak U.K. retail sales data, although the greenback’s gains were expected to remain limited ahead of Donald Trump’s inauguration ceremony later in the day. GBP/USD hit 1.2290 during European morning trade, the session low; the pair subsequently consolidated at 1.2296, shedding 0.40%.Cable was likely to find support at 1,2119, the low from January 13 and resistance at 1.2417, Wednesday’s high. The U.K. Office for National Statistics said on Friday that retail sales declined 1.9% in December, confounding expectations for a 0.1% slip. Retail sales fell 0.1% in November, whose figure was revised from a previously estimated 0.2% rise.Year-on-year, retail sales increased by 4.3% last month, compared to expectations for a 7.2% climb. Core retail sales, which exclude automobiles, dropped 2.0% in December, disappointing expectations for a 0.3% fall. The pound had rallied after British Prime Minister Theresa May confirmed on Tuesday that Britain will be leaving the single market when it exits the European Union, but would seek maximum access to it through a new trade agreement.
Commodities:
Gold surged to 8-weeks high.
Gold prices gained on Friday in the U.S. as Donald Trump delivered an inaugural address as president that vowed to pursue an America First policy in economic management, raising same concerns that global trade patterns are in for more shock as Brexit looms and the North American Free Trade Agreement comes under the scanner." From this moment on, it's going to be America First," Trump said. "Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength." On the Comex division of the New York Mercantile Exchange, gold futures for March delivery rose 0.67% to $1,209.50 a troy ounce, while copper futures gained 0.21% to $2.616 a pound with the industrial metal seen as a bellwether for global economic prospects. The dollar weakened against a basket of currencies on Friday as Donald Trump became the 45th president of the United States and used his inaugural speech to hit populist themes on halting off-shoring of work that have raised concerns of a trade war with leading manufacturing exporters such as China. However, gold faces resistance to higher prices on expected interest rate hikes this year with Fed Chair Janet Yellen noting on Thursday the central bank should continue to raise interest rates, but slowly. Speaking at a conference in San Francisco, Yellen said that "allowing the economy to run markedly and persistently ‘hot’ would be risky and unwise," before adding: "I consider it prudent to adjust the stance of monetary policy gradually over time." The greenback also initially strengthened on Thursday following the release of strong U.S. jobless claims and housing starts data, as well as an upbeat Philly Fed manufacturing activity report on Thursday. A stronger dollar makes gold, denominated in greenbacks, more expensive in other currencies, particularly the world's top two buyers, India and China.
Crude prices jump as OPEC production cap expectation.

Crude prices jump as OPEC production cap expectation Crude prices jumped on Friday with investors noting an OPEC meeting next week could confirm solid compliance in a coordinated effort with non-OPEC nations to trim almost 1.8 million barrels per day (bpd) from global production. Crude oil for February delivery on the New York Mercantile Exchange jumped 2.04% to settle at $52.42 a barrel. On the ICE Futures Exchange in London, Brent oil for March delivery rose 2.46% to settle at $55.49 a barrel. However, price gains were tempered as U.S. oil drillers added 29 rigs by the end of last week taking the total to 551, compared to 510 a year ago, as drilling activity in shale formations continues to grow again with higher oil prices. Since crude prices first topped $50 a barrel in May drillers have added a total of 235 oil rigs, with almost two-thirds in the Permian basin, the nation's biggest shale oil formation located in west Texas and eastern New Mexico. Other supply responses are coming from OPEC members Libya, Iran and Nigeria which are exempt from the cuts. Libya's National Oil Corporation (NOC) said its output now stands at 722,000 bpd, resuming its rise from levels below 400,000 barrels a day late in December after warring factions allowed oil fields to resume output and ports to load supplies.
Indices
U.S. stocks and S&P 500 declined this week
It was negative week for U.S. equities. Starting with the U.S. stocks; Dow Jones fell 122 points and lost 0.62%. Nasdaq Composite lost 0.36% and fell 20 point. S&P 500 fell 7 points and lost 0.31% for the week.
Coming to European counterparts, UK’s FTSE 100 fell 137 points and lost 1.90%. German DAX 30 also fell 58 points and lost 0.50%. Additionally French CAC 40 fell 56 points and lost 1.16 % on the weekly basis.
In commodities Gold loss $9 and gains 0.74% while Crude Oil gains .28 cents over the week.
Euro gain 0.68% over the week while Yen lost 0.44 %. Pound fell 1.67% and dollar index also gain 0.48% on this week.
Note: Here all the currencies are measured in percentage against the U.S. dollar.