Good morning,
After petitions, protests and pondering on the democratic fairness of prorogation, the dust settled on sterling with a modest recovery to the largely symbolic 1.10 area on the euro and 1.22 on the dollar. Boris Johnson has upped the ante in response to the outcry by insisting that he will now meet his EU counterparts twice a week for the next 30 days to find a deal.
Risk remains high for pound; however, there is a gathering consensus that despite the prorogation, a rebel alliance will band together to force a caretaker government, just long enough to gain an extension from the EU and avert no-deal. Admittedly, we have been here before, with the preverbal can being booted down the road – either way – when the can is airborne rather than in the recycling, sterling could look to lift itself to 1.15 on the Euro and 1.27 on the Dollar in the short run. That, of course, is a big if.
As with anything related to Brexit, a huge amount is left to conjecture, fate and a dose of good fortune; one thing that doesn’t suffer from political outbursts is economic data.
Today we have two important releases to note; at 10.00am we have unemployment and inflation data from the EU, as well as inflation and earnings figures from the USA at 13.30. Both sets of numbers will be scrutinised and linked to their respective central banks for a response.
In Europe, the figures will come under the microscope from the ECB, who will look to build the case for additional monetary stimulation of the economy, as an increasing number of citizens are savings overspending – as seen by Germany’s awful -2.2% retail release early this morning. The EU needs its inhabitants to spend and remain confident, despite global uncertainty, and if that means maintaining negative current account rates for Euro holders: so be it.
In the United States, President Trump altered his gaze from Greenland and instead talked up the launch of SpaceCom, the USA’s military expansion into ensuring readiness for “Star wars” warfare of the future; with Trump insisting “it’s all about space folks”.
Back on planet Earth, the USA’s economy is stuttering. On one hand, Trump boasts about the economy being stronger than ever – perhaps in the history of time by his own reckoning. On the other hand, he regularly makes demands of the Federal bank to offer the kind of interest rate cuts and stimulus offered to a country in deep recession. It’s a paradox that I have mentioned countless times before, but this one thing is for sure: Trump can’t alter the figures, the USA is teetering with a recession in some sectors and the wheels could come off and tank his re-election campaign.
With plenty to digest from an incredibly busy and turbulent week, it’s important to ensure your exposure is covered and strategy is in place whilst the markets lay dormant over the weekend. As most political chat shows are over the weekend, the market has a nasty habit of reacting to these on Monday morning at market open.
Give us a ring on 02073269120 to discuss in more detail.
Have a fantastic weekend.