A US accent (in a British accent)

Daily update

Federal Reserve Chair Powell testifies to the Senate today. Yesterday’s remarks were consistent with three or four rate cuts this year, but there was a surprise suggestion that a proposed tightening of bank regulation may be rethought. Fed President Kashkari hinted at support for a drastic tightening of monetary policy (suggesting only one rate cut this year, generating soaring real rates).
US President Biden delivers political theater in the form of the State of the Union address. Aside from political point scoring, market attention will be on inflation and China. Although profit-led inflation is starting to reverse, consumer inflation perceptions are (incorrectly) high. The presidential election may well be won or lost in the aisles of Walmart. Trade and China may also get a mention—China’s foreign minister attacked US trade policy overnight.
The Fed’s Beige Book of economic anecdote reported modest economic growth, but increasing consumer rebellion against profit-led inflation. Consumers stop spending if they think price increases are unfair. Labor markets are exhibiting less turnover (long-serving workers tend to be more productive—I am in my fourth decade at UBS).
The ECB meeting will produce an opportunity for ECB President Lagarde to speak, but little else. German factory orders were weaker, but the previous month’s data (obviously) was revised up.