- Sterling jumps on election announcement
- USD weaker on Organization of the Petroleum Exporting Countries (OPEC) news and Sterling’s advance
- Aussie consumer confidence slips
Well, that was a turn up for the books, wasn’t it? Prime Minister, Theresa May, caught everyone napping after her walk in the countryside persuaded her to call a snap election. I love hearing other politicians accusing a Prime Minister of playing politics, as though they wouldn’t think of such a thing. And I love the fact that, whilst they all accuse her of U-turning, they will definitely vote for the election to take place.
The markets liked the idea, but shares in the major exporting businesses slipped as Sterling rallied. Their earnings are likely to be damaged by the strength in the Pound. Sterling’s rally appears to be related to the kind of Brexit deal that could be done by a UK Prime Minister with a sizeable majority in Parliament. EU commentators suggested a Prime Minister with the clout to deliver on any agreement was a better counterparty for the EU negotiators to deal with. If that is so, a softer Brexit with more concessions on both sides is more likely and that is seen as a positive for the UK economy.
Sterling’s day was a bright one; after the initial dip, traders got to grips with the logic of the decision and the Pound began to rally. That rally certainly wasn’t hindered by the International Monetary Fund (IMF) raising its forecasts for UK growth.
There was other news, though. OPEC has committed to bringing down oil inventories and returning some stability to the petrochem market. That means higher prices, with the consequences of higher inflation around the world and a weakened US Dollar. Whether the USD will actually weaken or just not strengthen as much is a moot point at this stage.
With that in mind, this afternoon brings the release of the US Federal Reserve’s Beige Book; a regional perspective on the US economy. That is expected to be rather upbeat, although we can expect the overuse of the words ‘moderate’ and ‘somewhat’, as is their wont. The US Dollar, which has weakened on the oil news and against a stronger Pound, is marginally weaker against the Euro as well.
Before then, we will see EU inflation data, which is forecast to be a tad stronger than last month. The Euro has fallen back to flirt with €1.20 against the Pound, but is fairly robust against the weakened USD at $1.07.
Overnight, we heard that the weekly consumer confidence measure in Australia fell back last week to return the index to its average level. In fact, expectations for the economy over the next five years dropped by 4.1%, the index’s lowest level since September 2015. The Reserve Bank of Australia is battling a familiar problem; overheating housing markets in major cities, but less so elsewhere. Hence, no room to raise interest rates to cool the city housing markets for fear of killing more rural economies. The Aussie Dollar remains at the weaker end of recent ranges.
That’s about all there is for today. You’ll have plenty of electioneering rhetoric to deal with, so I’ll leave you to put your headphones on and lie down in a darkened room ready for the onslaught. Oh and there is one other story. Apparently, World War Three will start on 13th May 2017. That isn’t my prediction, it is the word of self-proclaimed ‘messenger of God’ Horacio Villegas. He predicted the Donald Trump election win (a number of other people did that, by the way) and he believes nuclear war will break out on the 100th anniversary of the visitation of Our Lady of Fatima. That was 13th May 1917. I just thought I would mention it…just in case you were wondering. Tin hat, anyone?
The US Secretary for Defence, Ash Carter, is briefing Donald Trump in the Oval Office.
"Oh and finally, sir, three Brazilian soldiers were killed in Syria today."
Trump goes pale, his jaw hanging open in stunned disbelief.
He buries his face in his hands, muttering "My God…My God".
"Mr. President," says Carter, "Soldiers in battle die. It’s terrible, I know, but I’ve never seen you so upset. What’s the matter?"
Trump looks up and says…"How many zeros are there in a Brazilian?"