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August

Central banker Hole’d up

Published: Friday 24 August 2018

  • Brexit speculation weakens Pound
  • Aussie Dollar weaker as Prime Minister changes again
  • Japanese Yen drops on JPY 100 trillion budget news
​​By David Johnson
 
Eurozone consumer confidence is at the lowest in over a year and that is another reason for the Euro remaining weak. Having said that, the Euro is stronger than the Pound but after the blathering about the impact of a ‘No deal’ Brexit yesterday, that is hardly a surprise. When are they all going to admit they have no idea what will happen after Brexit. I’d be happier if they would.
 
US president, Donald Trump tried to switch the focus of news reporters to the US’s squabble with China and the EU to avert eyes from the criminal activities of his campaign team. He also claims the US stock markets would slump if he were impeached. That doesn’t mean it shouldn’t happen if he is directly implicated with the activities of his campaign manager and his lawyer. The self-deluding nature of the President was laid bare when he contested that, because he paid Stormy Daniels off with his own money and not campaign money, it was OK. Thank goodness there is no moral issue involved.
 
US new home sales fall back to worst level in 9 months but home prices rose by 6.8 year on year in Q2. However new claims for jobless benefits are at the lowest level for almost 50 years; not so surprising when the unemployment level in the US is so low as to suggest almost full employment. America may be forced to open the door to Mexico to fill some of those job vacancies soon. It would save the hassle of all that wall construction anyway. 
 
The weakness in the Australian Dollar that we see this morning has a lot more behind it than just the ousting of Australia’s Prime Minister and the commencement of the 6th leader in 10 years. That is all happening against a backdrop of strong economic growth but slack inflation, low wage rises and declining house prices in some areas. It’s an odd combination and one that is being commented on widely this morning. The combined impact of all of this is that traders are delaying their forecasts on Australian rate hikes and that too weakens the Aussie Dollar. Investors in the past have taken advantage of Australia’s relatively high interest rate yield but the gap has narrowed and, in some cases, disappeared completely. Further AUD weakness is a real possibility.
 
There is a smattering of data today but the markets will be more closely focussed on the gathering of central bankers and their acolytes in Jackson Hole, Wyoming. I can’t help thinking of them as the hole in the wall gang, as in Butch Cassidy and the Sundance Kid. But that’s just me I guess. Either way, with the fragile recovery of the global economy still needing a lot of nurture, these individuals hold alot of sway.
 
In hard currency terms, the Pound is curled up in a ball around €1.11 and is just about floating against the USD at 1.2830. The Euro, for its part is doing well against the slightly weakened USD at $1.1560 and the Japanese Yen has weakened on the back of suspicion that the budget being requested by ministries in Japan will hit a record level above JPY 100 trillion. The implications for higher taxation are being mulled.
 
And I love the widely reported news that a fish and chip shop in York has translated the menu into Mandarin and Cantonese to cater for the enormous number of Chinese visitors flocking to York. I am surprised though that they missed the obvious headline of ‘Chip Shop Suey’, so I am donating that for free. You’re welcome. Just try saying ‘Chip Shop Suey’ three times fast. Have a great weekend.     

Knock Knock

Knock Knock.
Who’s there?
Control Freak.
Con…
Now you have to say, “Control Freak who?” 
 
Knock knock.
Who’s there?
A little old a little old a little old lady.
A little old a little old a little old lady who?
Oh, so you can yodel.
 
Knock Knock.
Who’s there?
Day Jarve.
Day Jarve who?
Knock Knock.
 
Knock Knock.
Who’s there?
Nobel.
Nobel who?
No that’s it. You have no bell.
 
Knock Knock.
Who’s there?
CIA.
CIA wh…(slap).
Speak again and you’re on the next rendition flight to Guantanamo.

Today's Major Economic Releases

Market BST Data/Event Previous Expected
ALL Day Two Jackson Hole Symposium    
GBP 09:30 UK: High Street Lending 40.5k 40.6k
USD 13:30 US: Durable Goods Orders 0.8% 0.7%
USD 13:30 US: Core Durable Goods Orders 0.2% 0.5%

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