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Biden Arrives in Northern Ireland

Yesterday evening, the US president arrived in Belfast for a four-day visit to the Island of Ireland.

Yesterday evening, the US president arrived in Belfast for a four-day visit to the Island of Ireland where he will meet Rishi Sunak in Belfast and Michael Higgins in Dublin along with other delegates from many sides of the political spectrum. Joe Biden’s trip comes as people mark the 25th anniversary of the Good Friday Agreement and his visit also follows in the wake of the Windsor Framework which failed to revive power sharing in Stormont.
While it was hoped that an adoption of the Windsor Framework deal would allow for power sharing in Stormont to continue, the DUP’s apparent rejection of the revisions indicates that the political deadlock in the Northern Ireland Assembly will likely continue.

Crucially, the Stormont brake can only operate if there’s a sitting Assembly – a counterfactual given that the DUP have refused elect a speaker in Stormont (the pre-requisite of forming a government) while the current arrangements are in place. As such, Biden’s itinerary does not take him through Stormont, though there is speculation on whether he may attempt to ‘nudge’ the DUP back into power sharing, an issue of the utmost fragility.

Swiss National Council Vote on Credit Suisse Deal but Rejection is Largely Symbolic

Yesterday saw the first of two sessions held in the Swiss National Council (Switzerland’s lower house) where policy makers discussed the Credit Suisse-UBS deal and regulatory changes. While Parliament does not have the authority to overturn the deal (given that it’s already been signed off by Bern’s financial delegation), its symbolic rejection of the 109b CHF in government guarantees for UBS’s takeover of Credit Suisse has highlighted how contentious the deal has been within Switzerland. The Lower Houses rejection of the deal stands in contrast to the Upper House which voted in favour of it earlier in the day.

Patrick Harker on Fed’s Monetary Tightening

Yesterday, the Philadelphia Federal Reserve Bank President Patrick Harker said that while the full effect of the Fed’s monetary policy action can take a year-and-a-half to show in the wider economy, there are positive signs that monetary tightening is working. Nevertheless, Harker highlighted that progress was slow and reiterated that the challenge of getting inflation back down to their 2% target was of the utmost importance. As such, Harker maintains that interest rates ought to be raised above the current 5% level before sitting there to ensure inflation eases.

However, the Philadelphia Federal Reserve Bank President also cited that while the US banking sector is resilient, the Fed need to ensure that they do not put any undue stress on the industry by raising rates overly aggressively. Hence, all eyes will be on US CPI data released today, where investors will be hotly anticipating whether the print may change market expectations from the Fed’s rate decision on.

Markets Await US CPI

Today will see US CPI released where the market consensus is estimating a headline print of 5.6% on an annualised basis – unchanged from last month – and a core print of 0.4% on a month-on-month basis. Following strong non-farms data, money markets currently imply that there is around a 70% chance that the Federal Reserve will hike on 3rd May, though such markets indicate that the central bank are approaching their terminal rate.

Expectations that the Fed may tread a hawkish line were laid out when Fed Chair Jerome Powell told the Senate Banking Committee that markets may need to upwardly revise the Fed’s rate hike expectations, given a flurry of recent inflation, labour and growth data coming in hotter-than-expected. However, wider concerns over the global banking sector in the wake of SVB and Credit Suisse’s turmoil will be weighing on policy makers’ decision making today, with concerns that an overly restrictive monetary environment may destabilise markets further. Hence, following today’s pint the Federal Reserve will continue to balance a precarious tightrope. While further monetary tightening may help in their efforts to bring inflation back down to their 2% target, they will be keen not to overly tighten given current fragility in the financial markets – much of which has been attributed to the changing rate environment.


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JP Morgan’s Opinion in Focus

JP Morgan have made some interesting points in the last couple of days: speaking about the Fed meeting next week, they’re concerned that if the FOMC do press the pause button, but were then forced to resume rate hikes either in July, or after the summer, in the face of stubborn inflation, what would this do to risk appetite in the market, because it might be a bit unnerving to see that the central bank hasn’t got a firm grasp on the problem.

Halifax Index: UK House Prices Fall for First Time Since 2012

According to the Halifax house price index, the price of residential property fell for the first time since 2012. The 1% depreciation between May 2022 and May 2023 came in line with expectations as analysts assess the impact of higher interest rates on households.

Nova Khakovka Dam Destroyed in Kherson, Ukraine

The vast Ukrainian Nova Khakovka Dam has been destroyed in the Russian occupied region of Kherson, Ukraine releasing a torrent of water as concerns for residents and nuclear power facilities up and downstream grows.

Think Tank Seeks Backing for UBI Trial

Plans have been unveiled for a Universal Basic Income (UBI) trial in the UK, with the think tank Autonomy currently seeking financial backing. It is hoped that the trial will span over two years with participants receiving £1,600 each month and being in control of how they spend or save the funds.

All Eyes on US Labour Market Data

Today all eyes are on US labour market data where the markets will be looking to gain an insight into the health of the US economy and the extent to which the jobs market is feeding into inflationary pressures ahead of the Fed’s meeting on 12 June.

House Passes Debt Ceiling Bill

Last night, the House comfortably passed the debt ceiling bill in arguably the most important stage in the process to ensure that the world’s largest economy averts a technical default. The House of Representatives cleared the Fiscal Responsibility Act by 314-117, the bipartisan deal assembled by President Joe Biden and House Speaker Kevin McCarthy.

Debt Ceiling Agreement to go to House Vote

Tonight, congress will vote on the bill agreed by President Joe Biden and House Speaker Kevin McCarthy, as the US tries to avert X-date by raising the debt ceiling. According to Reuters, “the deal caps federal spending and forces more poor people to work for food aid, concessions that Democrats hate. But it also preserves much of Biden's Inflation Reduction Act and punts the next debt ceiling showdown into 2025, which Republicans hate.”

Core, Blimey!

As markets weigh on the Bank of England’s interest rate decision on 22 June, this morning’s hotter-than-expected inflation print has seen investors upwardly revise rate hike expectations. Indeed, market reaction to this morning’s print is a further reaffirmation that inflation continues to be the hottest topic of conversation.

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