The danger of distractions

Posted by: Paul Donovan

18 Dec 2019
  • US President Trump is likely to be impeached today. Markets do not care, assuming that the US Senate will vote on partisan lines and not convict. However, there is some risk if US President Trump decides to offer some distraction. An active Trump Twitter Feed is rarely welcomed in financial markets.
  • US Trade Representative Lighthizer raised the issue of trade with Europe. US President Trump's deficit financed tax cuts made an increase in the trade deficit almost certain. It does mean Americans get to import useful things in exchange for Treasury bonds that yield next to nothing. The concern for markets is that if trade does not disappear from the Trump Twitter Feed, uncertainty will not disappear from the global economy.
  • Sterling weakened to pre-election levels after UK Prime Minister Johnson suggested that 31 December 2020 was really, really the deadline for leaving the EU finally. It isn't really a definite deadline, but markets did not like the attitude. Sterling did rally against bitcoin (but that is not a currency).
  • UK inflation data might get attention, as the Bank of England wakes from its Brexit induced coma. The German ifo business sentiment opinion poll is due, as are German producer prices.

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