Rally Rally Rally
Who’s been eating my porridge?
It would appear that a small rally for Sterling has commenced this morning, however there have been several false dawns of late. Maybe this time with the market very extended the Bears might run for cover and some cooler porridge!
In an interview yesterday afternoon Stanley Fischer averred that the US economy was neither too hot nor too cold, in fact it is just about right! Core inflation is running at 1.7% versus the target of 2% and employment is just about full. Strangely the participation rate is beginning to move up from a relatively low base of 65% so no more improvement in the headline figure is expected.
Very strange that the US and UK produce similar headline unemployment numbers circa 5% and yet participation in the US is about 65% whereas the figure for the UK is nearer 75%. The main take from the Fischer interview was that December is almost a done deal, but that the next rise in interest rates may not come until December 2017 if at all.
Euro project in doubt:
When Otmar Issing, one of the senior founding architects of the Euro, warns that it is in trouble one should pay attention. His best hope for the Euro was that it would continue to muddle through struggling from crisis to crisis. His most serious and perhaps concerning remark was that the ECB has fatally compromised the system by bailing out bankrupt states in palpable violation of the Treaties.
He was further reported as saying that the Stability and Growth Pact had more or less failed, with discipline done away with by ECB interventions that have taken away fiscal control mechanisms from markets and politics. Harsh words indeed and nobody likes the truth!
Time for a bounce?
The 50 day moving average for £/$ sits at 1.2950 and that for £/€ is at 1.1568. Throughout time the daily rate converges with the average. Maybe the average comes down to meet the daily rate or vice versa. Sometimes they meet in the middle. With Sterling shorts back to record levels at the end of last week, the end of the financial year approaching, it would not surprise if some book squaring occurred over the next month or two.
Heathrow or Gatwick? As a boost to the economy it would be nice to see this teasing dilemma resolved. Amongst my colleagues there is a strong belief that Heathrow just won’t happen. Gatwick is 50/50. However amongst my egalitarian colleagues there is a desire to see the focus switched to Birmingham which after all is in the centre of the country. Small additions to Cardiff, Bristol and Manchester also featured. Who would be a politician on half of what some footballers earn in a week?