Losing the magic

Posted by: Paul Donovan

20 Feb 2019
  • Today's excitement is the US Federal Reserve's January meeting minutes. The Fed was very "on message" at the start of the year, but recently there has been more of a range of views. Yesterday, Fed President Williams (perhaps the leading economic voice at the Fed) suggested a change in the growth or inflation outlook would be needed to prompt rate hikes.
  • Trade issues continue. Japanese exports to Asia weakened ahead of the lunar new year, and exports to the US grew strongly. US President Trump tweeted about equities – trade is relevant as tariffs are effectively a tax on equities. The president indicated that the US–China 1 March deadline is not in fact a magic deadline at all, just another day in the Oval Office.
  • UK Prime Minister May heads to Brussels to meet with one of the many EU presidents. The Irish problem remains the focus. Without movement on this, the UK Parliament is unlikely to pass the government's withdrawal agreement. The 29 March magic deadline would become just another day in the office.
  • ECB Chief Economist Praet speaks, but markets are unlikely to learn much new. German producer price inflation gives a hint as to corporate pricing power, which is worth looking at.

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