Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Tell Us Something We Don’t Know

Published 23/11/2017, 08:57
Updated 09/07/2023, 11:31

Budget a non-event

It is an old political gambit to release bad news while the public’s attention is elsewhere. Brexit is the perfect cover for any bad news to be released so yesterday’s cut in growth projections for the U.K. to 1.5% up to 2021 was perfectly hidden in plain sight.

When watching the performance of the various players yesterday, it was clear that their heart wasn’t in it and they were saving their best lines for coming debates centred around Brexit.

It came as no surprise that Hammond predicted the lowest rise in growth in decades as the U.K. is going to suffer no matter what kind of Brexit is agreed. It is without question that the EU negotiators plan to make access to the single market, their Jewel in the Crown, as difficult as possible to deter other countries from going down the same path.

Sterling was barely changed versus the euro yesterday having its narrowest range for three months which is ironic since budget day is usually a volatile time. It was virtually unchanged at 1.1230 versus the common currency although it had a better day against a dollar suffering from its own issues.

U.S. rate hikes in question

Jerome Powell is going to be a more pragmatic Fed Chairman than Janet Yellen and I won’t face the almost daily quandary of addressing a woman as Chairman!

Powell will rely on data to drive FOMC decisions since he sees little need for pre-emptive action. That could of course change but for now the “slow burn” pace of the U.S. economy suits his style perfectly.

Yesterday’s release of the latest set of FOMC minutes illustrated that it is the perfect time for a change from Janet Yellen’s more proactive style to Powell’s more reactive ways.

Benign inflation data is confounding analysts and FOMC members alike. This calls into question the rate hike that is being predicted for next month although the minutes do confirm that “rates will have to be raised in the near term”.

The dollar index fell close to a one month low due in part to the FOMC minutes but also in reaction to the release of weak durable goods data which showed that orders for “big ticket” items fell by 1.2% in October following a 2% rise in September which was revised down from 2.2%

Europe suffering from distorted news

I wanted to say, “fake news” but since it is based on fact, the distortion of the news about Germany, Spain and Italy with Poland and Hungary not far behind is more about biased conclusions than being untrue.

The former German Finance Minister and scourge of Greece, Gerhard Schaeuble, who is now President of the Reichstag commented yesterday that any mention of a constitutional crisis in Germany is an exaggeration.

Angela Merkel is still in charge and, constitutionally, she can continue with all her ministers in charge, albeit on a caretaker basis and this can last indefinitely. It is rumoured that Merkel is coming around to the idea of a minority government that is favoured by the German President who clearly has concerns about the rise of the right. It remains to be seen just how this will play out, but Merkel will want to take her place at the top table at the EU Heads of Government meeting on December 14/15 where the decision over stage two of Brexit talks will be made.

Spain seems to be dealing with the Catalonian crisis well and tell me a period in modern history when Italian banks weren’t on the brink of collapse. It is well known that the Eastern part of the bloc will take some time to bed into the politics of Europe so any unrest in Poland and Hungary is only to be expected.

News of the EU’s demise is greatly exaggerated!

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.