Explaining the inexplicable

Posted by: Paul Donovan

27 Mar 2019
  • There are ECB speakers everywhere today. Soon-to-be-replaced President Draghi and outgoing Chief Economist Praet head the list. Sentiment data allows a cautious outlook. Actual economic data allows a positive economic outlook. (The gap between sentiment and real world data is very wide). Speakers can explain the outlook however they want.
  • US President Trump's possible nominee for one of the vacant Fed governorships, Moore, suggested that the Fed should cut US interest rates by 0.5% at once. Moore described the December rate hike as inexplicable. Perhaps trend growth, rising wages, normal credit growth, full employment or low real interest rates could explain it?
  • The UK Parliament "takes control" of the inexplicable and interminably tedious UK-EU divorce today. (Parliament actually takes control of very little). Leading anti-Europeans seem to be mimicking the heroine of Don Juan and "whispering 'I will ne'er consent' – consented". They might accept the government's divorce settlement after all.
  • US February trade data is due – US-China trade talks resume tomorrow. Markets expect a smaller deficit from current record levels. US companies may try to delay imports; a trade deal could reverse the Trump trade tax increase on US companies, and it is better to import after such a tax cut.

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