More plans
In an eagerly awaited speech to Congress yesterday President Trump, yet again, outlined his plans for reform of America’s tax and immigration systems. It almost feels like he's going to go from inauguration to re election campaign without actually enacting any policies. It may be that he prefers the “executive order” approach where he can just sign something to law without really having to bother with those pesky senators and congressmen.
The dollar reacted poorly to his speech but managed to recover following a more concerted effort on behalf of FOMC members to present a more considered approach to monetary policy.
The dollar was firmer against the euro and yen as FOMC members reinforced the likelihood of a rate hike on March 16th. Interest rate futures are now pricing in a 70% chance of a hike up from 30% a week ago.
The foreign exchange market seems to have entered a totally new era where ranges are narrow but within those ranges there is a degree of volatility. These more “mellow” markets are then punctuated a flash crashes which create havoc.
Anyway we can only deal with or comment on what is put if front of us.
The new Bank of England Deputy Governor Charlotte Hogg started her new job yesterday and immediately showed her monetary policy credentials. She commented that a reactive approach to monetary policy in which inflation is allowed to rise unfettered would be a concern to her. It seems she lives in the present wanting to deal with issues as they arise rather than adopt the wait and see attitude of her boss.
Big Data Day
It's the first of the month and that means purchasing managers. In the EU, UK and U.S. the purchasing manager's reports on production have been showing decent expansion over the past few months.
With a read of better than 50 meaing expansion and below 50 contraction, we have seen the major economies growing and producing decent expansion at around 55. The most under pressure of those three is the UK where last month's huge rise in input prices may have dampened production somewhat.
We also have the release of employment data in Germany today with a rate of just below 6% expected. The employment market in Germany has held up well considering the overall EU figure is nearer 10%.
This all points to further inflationary pressures in the country but they will just have to live with it as the rest of the Eurozone catches up. There will probably be a comment from a Nationalist Candidate in one of the upcoming elections that Germany will need to leave the EU if it cannot thrive under one size fits all.