Good morning,
Referendum watch – 13 days to go
With another EU referendum debate and Question Time last night, political animals had a lot to sink their teeth into. Once again there was little political inspiration on show and the campaigns are now in what really equates to a street fight; using any and all implements to inflict the utmost damage on the others. Could be a pipe, could be a brick, and could be Eddie Izzard.
We are not expecting any polling data to emerge during the session but instead look to the weekend for inspiration. We believe that a Sunday Times/Yougov poll on Sunday will be what we are talking about come the open on Monday morning.
Sterling is quiet at the moment I think for two reasons; one for the lack of polling and data but also the fact that traders are unwilling to commit to either side at the moment for fear of getting carried out kicking and screaming.
UK construction output is due at 09.30 today but, as we saw in industrial production at the beginning of the week, the impact of a great number is forgotten about in 12 minutes of trading.
Dollar and bonds higher on risk
The USD rebounded slightly through the US and Asian session yesterday as markets took notice of the upcoming risks in the next fortnight and headed for a safe harbour. Equity markets were lower after 3 days of gains whilst oil markets also took a break from running higher following 3 consecutive sessions of rising prices.
Indeed, bond markets have been creeping higher in the past few days as investors have woken up to the feeling that the global economic slowdown, the risks from the UK referendum and the weakening of prospects of a near-term Fed rate rise. The yields on German and British 10 year debts have hit record lows in the past few days as demand has increased, with another record low seen in Japan overnight. Investors are protecting themselves from that view as a potential car crash in the coming months and betting that central banks will have to increase stimulus to help economies stay out of a downward spiral.
Elsewhere
Mario Draghi, ECB President, spoke yesterday to outline how European politicians need to help the central bank more. Monetary policy and fiscal policy are pincers on an economy; with only one working the economy gets prodded around but lift-off cannot be attained.
It’s not like the politicians in the Euro bloc are great reformers but it is not just Germany; France has been trying to push through reforms for the past 20 years and they can’t get them done. Italy is stuck with first changing its electoral law. Spain is in a political deadlock. And Greece? Oh yeah…
The big economies are all stuck, even the UK can’t get its deficit down. It’s pathetic to see how poor politicians are in Europe, across the board and Draghi is left holding the bag.
Have a great day and a better weekend.