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Daily update

  • Today’s data calendar is free of serious economic data (there are some business sentiment opinion polls). Markets are free to speculate about the forthcoming US Federal Reserve meeting, and to play at politics.
  • Fed speculation is developing an echo chamber quality—markets are getting excited by market forecasts of the Fed. It is a bad time to be forecasting the Fed. Headline inflation is high (even if the cost of living is lower) and it will not fall for a while, but inflation will fall regardless of the Fed response.
  • Tensions over Ukraine have increased again this weekend, with the US ordering the evacuation of diplomats’ families. Cynically, one could suggest that this is a diplomatic signal rather than an increase in tensions, demonstrating that the US is taking the situation seriously.
  • Italy’s presidential election gets underway (the process will likely last several days). Markets expect Prime Minister Draghi will take the role, but some members of parliament fear this may cause early elections and political instability. Political instability is not unknown in Italy, and markets may not care. In the UK a report into Prime Minister Johnson’s partying is due this week. If Prime Minister Johnson resigns markets are unlikely to care, and it may promote political stability.

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