We heard a lot from Donald Trump last night on a 90-minute interview with his arch nemesis CNN! The interview brought back all sorts of memories of an openly combative era that we’d hoped had passed and was a clear reminder of what we might be returning to in 2025! The interview was pretty wide ranging, but a pertinent point to pick upon was The Donald’s take on the debt ceiling – “I say to the Republicans out there, congressmen, senators, if they don’t give you massive cuts, you’re gonna have to default”. His view is that a default is inevitable one day, so they might as well press hard for their demands in the knowledge that
Democrats will likely cave to them, but in any case, nobody knows how bad a default would be “it could be really bad, it could be maybe nothing, maybe it’s a bad week, or a bad day, who knows?” (But if it happens when you’re not in power, or even in opposition, what’s your personal downside?!). His words will serve to galvanise the Republicans that do want to take a firmer line on this and could mean that what we said at the beginning of the week wasn’t likely to amount to much, might amount to a lot.
The UK government has rolled back the pledge to revoke all EU laws by the end of the year. The policy, which would have seen a legislative bonfire of 4,000 pieces of EU law has been watered down considerably, with plans now to identify 600 laws to be revoked. The sunset clause had been met with apprehension by businesses and concern from opposition benches that it would then allow ministers to replace laws as they saw fit, which may weaken regulation overall. The government’s take is that it is better to slow down the expiry and work through a process that allows meaningful reform, rather than rush it and focus on reducing legal risk. Not everyone is OK with it though; Jacob Rees-Mogg tweeted “regrettably the Prime Minister has shredded his own promise rather than EU laws”.
It’s the Bank of England’s turn to decide on interest rates today and expectations are for another 0.25% increase, taking us to 4.5%. The Bank’s most recent forecast sees inflation at the end of the year below 4%, but that is being contradicted by the NIESR, who think it will be at 5.4% by the end of 2023 and not back to the Bank of England’s 2% target until late ’25. A rate rise today is almost completely priced in and markets still expect more of the same until we get to, or above, a five percent base rate. As per the US’ conundrum, it may be that inflation remains stubbornly high for longer than expected, despite the recent fast falls in energy prices. As a guide, Rishi Sunak’s pledge to halve inflation in 2023 would mean getting the number at or below 4.5% by December.
In company news: Microsoft won’t be giving pay rises this year as it recognises that “navigating both a dynamic economic environment and a major platform shift requires us to make critical decisions in how we invest in our people, our business and our future”. The major platform shift being referred to is doubling down on AI and the economic uncertainties are clear to most – however, two weeks ago they did announce $53 billion in quarterly revenues and $18 billion of net income a couple of weeks ago, which led to a big jump in the share price, so we don’t imagine this will have gone down brilliantly with employees.
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.
In a win for the UK space industry, the CAA looks set to approve Britain’s first vertical spaceport in the Shetlands according to The Telegraph
Thursday sees the start of COP28 in the UAE, and reports from the House of Lords calls reforms in the BoE.
The release of the PMI index yesterday showed private sector output expanded across the UK for the first time in three months
Fiscal loosening measures announced in autumn statement, from January energy price cap will rise, and what's happening today.
Autumn statement released in Westminster later today, ECB warn of high levels of commercial property sector debt, and a focus on the Fed minutes.
Second highest level on record for public sector borrowing, interest payments on government debt rise, and going back on foreign aid commitments from Cameron.
New president voted in for Argentina, publication of FOMC's Minutes, and market expectations met by the PBoC.
Falling UK retail sales, a very wet October, redirected HS2 funding, slumped oil prices, and release of Eurozone inflation figures.