Head of German central bank suggests not second guessing data releases, situation in the Middle East escalates further, Rishi's bill passed, fall in UK house prices, and what is in the data for today.
It was the head of the German central bank, Jaochim Nagel, speaking yesterday that gave his thoughts on rates, but some more interesting comments on his feeling that Europe needs to focus more on itself than worry about whether Donald Trump gets into office again. “We have to improve Europe in resilience and make it stronger…and then we will be prepared next year when we know who will be the next US president”. This feels like he’s putting a brave face on it, but he has got a point that Europe could probably use the months head of the election to think and act on areas around military and energy security, in case a sudden sweeping change comes from the West this time next year.
On rates, his view is to look at the data when it arrives, not to try and second guess it, which is sounding more and more sensible given the growing risks to prices.
Speaking of risks, The Middle East situation has escalated, with Iran targeting militant groups in Pakistan with missile strikes yesterday, which Pakistan has since responded to with missile strikes in Iran. Iran’s readiness to admit to its missile attacks in Pakistan have moved them away from their usual ‘proxy war’ sponsors and are now taking direct responsibility for their actions, which is being seen as a show of strength in the region.
This tit for tat exchange has pushed the price of oil and kept the dollar in a strong position, as did news of another US strike against Houthi targets in Yemen.
On the domestic front, Rishi got his bill passed last night and can breathe easy for a while. The bill will now make its way to the Lords, do a bit of back and forth between there and the Commons and likely be passed into law around March. It will be interesting to see how long it takes for planes to take off to Rwanda thereafter!
Other UK news comes in the form of house prices, which have seen their biggest year on year fall in more than a decade. Price data from November shows that prices nationally fell at 2.1% year on year, whilst in London that was a more severe fall at 6%. Despite this the RICS survey says that sales forecasts for 2024 are expected to be their strongest since the pandemic – though if this is predicated on falling interest rates, some wind might be taken from those sails.
Today we look at US jobless claims and housing starts. As per yesterday, we see economic data being the secondary driver of markets, with geopolitics taking being the likely driver of any material moves.
Have a great day
If you would like a PDF of this commentary, please contact us and we'll be in touch.Contact us
Find out how we have helped our clients meet their hedging requirements.
Thought for Thursday, House of Commons ceasefire vote decision, minutes released from Federal Reserve monetary policy meeting, geo-political update in Russia and Gaza, and looking at today's data.
Word of the week Wednesday, data indicates public sector net borrowing in surplus, this afternoons House of Commons vote for a ceasefire in Gaza, and release of FOMC policy me.eting minutes
Travel Tuesday, changes for China's property market, attacks on Red Sea Vessels cause further shipping disruption, EU defensive naval operation launched, and US propose a UN Security Council Resolution in the Middle East.
Macro Monday, update on Israel-Gaza conflict, town in Ukraine in full control of Russian forces, and pressure for creation of more public-private partnerships in the UK from insurers.
Friday Feeling, Labour take comfort in by-election results, potential for income tax cut plans to be dropped, president of European Commission speaks on European Union defence production.
Thought for Thursday, data released this morning shows UK in technical recession, Sunak's pledge for economic growth takes a blow, increasing number of MPs not looking for re-election for the Conservative party, and Labour party lead drops seven percentage points.
Word of the week Wednesday, hotter than expected US inflation, inflation data in the UK comes in double than BoE's target, US Senate agrees foreign aid package, and today's data.
Travel Tuesday, plight of US commercial real estate owners according to Bloomberg, data shows increase in UK wage growth, easing UK unemployment, and talks to revive negotiations in the Middle East.