Daily Macroeconomic Outlook - 10 November 2016

Donald Trump is the President-elect of the United States. The dust has yet to settle from this surprise outcome, however it is safe to say that in the near term, volatility in financial markets will remain elevated as investors account for disruption to the status quo. Aside from the campaign rhetoric, there is little clarity on his economic policies at the moment, which could induce a risk-off mode in global markets. The impact of this increased market volatility on the monetary policy of several countries will also weigh on investor minds as central banks have been a pillar of support for financial markets in the last couple of years. Republicans will now have control of the Presidency, Senate and House, and this means the new administration should be able to approve a more expansionary fiscal policy. Of course, we would also highlight that the actual policies of President Trump could turn out to be very different to the promises made by candidate Trump.

We still maintain that the U.S. Fed will enact two to three rate hikes before the end of 2017. Looking to the upcoming meeting in December, a rate rise is not out of the question, but will depend on the extent of market volatility that persists over the coming weeks. After the initial wave of risk-off sentiment that clouded markets in the early hours of yesterday morning, it is encouraging that we have since seen a sharp rebound, as the initial shock of a Trump presidency appears to have worn off.

The Emirates NBD Dubai Economy Tracker Index was released yesterday, which declined to 53.3 in October from 55.1 in September, signalling the slowest rate of expansion since April. Business activity/output continued to rise at a robust rate, with this sub-index at 57.9 last month. Employment was marginally lower in October, with firms citing pressure on margins and more cautious hiring policies. Indeed, output prices fell at the fastest rate since February as firms competed for new work. The sector surveys of the Tracker show that the slowdown was evident across all the main industries last month. However, tourism and travel continued to outperform, supporting wholesale and retail trade, while the construction sector remained the most sluggish.