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Two can play that game!

Tusk and Juncker double team.

 

There are many reasons why the U.K. voted in favour of Brexit almost a year ago. One of the main ones was the money wasted in Brussels and Strasbourg.

 

It has been well reported that there was a spat between Theresa May and Jean-Claude Juncker at a dinner last week. My question is “in what role was Juncker fulfilling my meeting May?” Why is there a President of the European Commission and a President of the European Council? It is bureaucracy gone mad. Following the press reports over the weekend, it seems that Juncker despite being a Luxembourger, reports direct to Frankfurt.

 

It is no wonder that the E.U. expects negotiations to take more than two years. The ratification of any agreement could take that time on its own.

 

French Presidential Candidate and favourite to win, Emmanuel Macron, a confirmed European has said that unless there is reform at the top of the E.U. he will be calling a Frexit referendum. Unfortunately, the whole fabric of the E.U. is built around a non-elected body which is fast becoming self-fulfilling.

 

FOMC meets as Jobs data looms

 

As one of the U-turns that have characterized his first one hundred days, President Trump has said that he wishes unusual policy measures could have stayed in place longer to ensure the economy is on a firm foundation.

 

This contradicts his macho stance while campaigning where he criticized the Fed in general and Janet Yellen in particular for retaining ultra-easy monetary policy longer than necessary.

 

Just another example of the difference between Campaigning and Governing.

 

It is certain that there will be no change to monetary policy as the FOMC meeting concludes later. The two rate hikes already this year will take time to filter through to the economy at large and Yellen is very aware of not choking off the recovery which according to leading indicators is not yet able to “stand on its own”.

 

The dollar index remains on a well-trod path. Ample liquidity means that it gyrates between 99 and 100 without any true direction or driver to create a trend.

 

Analysts looking at this week’s non-farm payroll data due for release on Friday have taken the easy option and plumped for the average of the past twelve months as their estimation of job growth on April. That figure is 182k but following last month’s surprise fall to 98k, the truth is it is a lottery.

 

One thing to watch for is a hefty revision to the April figure.

 

Strong U.K. data masks Brexit concerns.

 

Of all the areas of the U.K. economy that could end support, manufacturing wouldn’t be the first area of consideration.

 

Yesterday’s release of manufacturing activity showed an improvement from 54.2 to 57.3 against expectation of a slight contraction. This contrasts with the EU where manufacturing remained static and the U.S. where the New York index fell slightly.

 

It is likely that the fall in the pound over the past year has encouraged exporters both explore new markets and sell more to existing ones.

 

The issues facing the Bank of England are highlighted by the data and the recent performance of the pound. Inflation is continuing to accelerate. Any dampening effect of the pound will take some time to feed through. Weak retail numbers have been offset by manufacturing but this could easily be a series of one-offs driven by seasonal factors.

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