Euro at ten-month high
Draghi becomes the market’s darling.
It is a while since a Central Banker held the market in thrall the way Mario Draghi does. Sr. Draghi won’t win any personality contests and it will be a while before he rivals Messrs Greenspan and Bernanke but he is the right man in the right place for the Eurozone.
Lucky? Possibly. Steely in his determination? Probably. Understanding of his responsibilities to the entire Eurozone? Definitely. His fixed non-extendable term runs out on November 1, 2019. Replacing him will be a challenge to put it mildly.
Yesterday the ECB President turned from dove to hawk almost effortlessly. On Monday, he was extolling the virtues of low interest rates as a stimulus to borrowers and the creator of greater equality. Yesterday he voiced concerns that deflationary fears have been replaced by inflationary pressures.
The market drove the common currency to fresh ten-month highs as a weaker dollar fell to 1.1355. The basis for further gains is in place despite the FOMC’s continued rate hike policy and now that Sr. Draghi has at least acknowledged the possible need for a tightening of monetary policy resistance at 1.1420 and 1.1500 is under threat.
May in the firing line.
Theresa May will wake this morning (she probably already has!) to the awkward prospect of today’s Prime Minister’s Questions in the House of Commons. This will be the first of the new Parliament and she is sure to get a rough ride. The opposition Labour Party have already tabled an awkward amendment to the Bill on the Queen’s Speech so she is aware of the probable scenario.
Sterling rose versus the dollar but fell against the Euro as contrasting fortunes buffeted the major currencies. The pound was last trading at 1.2815 having reached 1.2862. The Euro finally broke 0.8840 and now has 0.9000 in its sights. The common currency is close to overbought territory so a correction may be seen before the “assault on the summit” takes place.
Public spending cuts are now the number one topic facing the Government domestically. This is the battle ground chosen by the opposition since it is aware of the Government’s “soft underbelly”.
Popular Socialism is fast becoming “de-rigeur” replacing what is seen as uncaring, business friendly right leaning policies.
Where are you Donald?
President Trump has been conspicuous in his absence over the past week or so. His healthcare reform legislation has again been delayed by Congress as the majority Leader tries to drum up more Republican support. This doesn’t bode well for Trumps ability to pass his stimulus and tax reform agenda.
Fed Chair, Janet Yellen spoke in London yesterday about measures that are now in place that cannot allow another financial crisis like that of 2008 to affect the market. Two words Janet; Black Swan.
Mrs Yellen Chairs a united FOMC. We have seen speeches this week from the Presidents of the New York and San Francisco Fed’s agreeing over the rate hikes so far and the (possible) one(s) to come.
Minneapolis Fed President Neel Kashkari, the President of the Minneapolis Fed, broke ranks a little yesterday, asking why the Fed needed to hike any more this year. He feels that since inflation is benign and wage growth muted the case for further rate hikes doesn’t exist. I am sure that even from far-flung Minneapolis, Kashkari can see the progress of the DJI.