A new political landscape emerges
It was at least refreshing to see Labour cast off its “New Labour” cloak and return to traditional values. Grudging kudos goes to Jeremy Corbyn for running a united campaign.
But what does it mean? In a word turmoil! Even if Brexit negotiations weren’t starting in less tha two weeks, the effect on the country will be difficult to manage. Brexit just throws a spanner, albeit a large one, in the works.
Sterling is set to fall, inflation will rise further, the slowdown will get worse and politically, uncertainty will reign.
It may be time for a Brexit negotiation team to be created that doesn’t necessarily comply with Party Political sympathies. The EU has a chief negotiator in place. Whoever is Prime Minister after the dust has settled should seriously consider this as a unifying gesture. There are plenty of good negotiators in Britain and since all parties basically want the same thing, give a negotiating team a mandate and let them get on with the job. It has worked with the Bank of England, why not Brexit?
Draghi opens the door, just a little
So, Mario Draghi sees the eurozone economy as neutral now. The removal of the bias towards a negative outlook should be viewed as something of a victory for those who are concerned that the ECB is falling behind the curve.
The facts, eurozone wide actually support Sr. Draghi. Growth is a little better than patchy but could be reaching a plateau. Inflation is benign and even Germany has seen price pressures tail off.
At his press conference, Sr. Draghi went as far as to say the outlook for inflation remained weak for years to come. Maybe as a show of solidarity he should lend his crystal ball to Mark Carney.
Trump to survive Comey mauling
It fell short of a smoking gun but was a unique commentary only the naivety even Presidents can display.
James Comey, the former FBI Director testified under oath to the Senate Intelligence Committee yesterday. He said that the reasons cited for his removal from office were spurious calling them lies, lies and more lies. When asked for his opinion on why he was removed from office Comey commented that he felt it was to interrupt or disrupt the FBI investigation into Russian influence on the election.
It is traditional but not law that the President doesn’t hold one on one meetings with senior members of law-enforcement. It is being said by Trump advisors that the President may not have necessarily known that, but Comey certainly should have. Semantics! A typical political storm in a teacup.
Currencies react to the perfect storm
Sterling fell by 2% before recovering a little as the election results turned from speculation into fact. 1.3000 now looks a mighty long way away but the market may just see a parliament where there is no clear leading party as a good thing.
The problem is and always will be, getting business done in a forum where scoring points is almost as important as the matter at hand.
Liquidity remained solid overnight with plenty of bids and offers allowing an orderly reaction to the shock of the election result.
The euro has gained ground against the weaker pound but is treading water as the negativity surrounding the dollar following James Comey’s testimony balances the likelihood that a rate hike in the eurozone could be more than a year away.
The dollar index had a brief relief rally as it became clear that Trump isn’t about to be pushed,and certainly won’t jump, out of office. It the settled back a little but remains supported close to 96.80/97.00