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Sordid politics, ECB speeches and US data

| Posted by: Paul Donovan | Tags: Paul Donovan

  • The departure of the US secretary of state (plus an under secretary) does not directly impact markets. The timing of the North Korea summit may be disrupted, but markets were not too interested in that. Indirectly, the historically high staff turnover of the Trump administration creates a perception of policy uncertainty. Markets prefer policy certainty.
  • A British response to the alleged Russian chemical attack on the UK is expected today. This being the world of James Bond, not all of the response is necessarily public. Markets will worry less about diplomatic expulsions, more about the consequences of any financial sanctions.
  • At least five ECB speakers are scheduled, including ECB President Draghi. Draghi appears not to have overcome an addiction to easing, and is likely to sound dovish. Nonetheless, quantitative policy with above trend growth, rising employment, rising inflation and rising bank lending is almost impossible to justify.
  • US retail sales and producer price inflation numbers are due. The strength of the labor market plus tax cuts is supportive for retail sales (though some of the spending is likely to leak away to imports). Producer price inflation has been showing a steady increase in corporate pricing power for the past two years.