Good morning,

Markets waited patiently for the Fed last night and couldn’t really have asked for more:  There was no change to policy or intentions for future policy, with their timeline for an expected rate rise still towards the end of 2023 and no sooner.  However there was an upward revision to growth and inflation forecasts – so the summary can be concluded as ‘we’re fully aware of what’s going on out there, but we’re not changing anything’.  Fed chair Powell  also reconfirmed that a reaction to rising bond yields wasn’t necessary and as long as markets are functioning in an orderly manner, then they’re happy to let things ride.  This was enough to weaken the Dollar pretty much across the board (though not against the Rouble) and for stock markets to edge higher. This has left the S&P 500 at jut 0.6% below the 4,000 level and it almost feels like permission has been granted by the Fed for the market to push on through.

Joe Biden upset Moscow yesterday after he answered ‘yes’ to the question “do you think (Putin) is a killer?”, which was posed to him during an ABC news interview.  This remark has led to Russia recalling their US ambassador to avoid “irreversible deterioration” of relations.  During the interview we also heard from the president that they are preparing a response to the news that Russia did meddle in the presidential elections, which we will find out about in the coming days.  The Rouble traded lower by more than one percent,  getting away relatively lightly because it was partially offset by the general weaker dollar move, but this is a trend that could continue if the inbound sanctions are particularly strong.

Staying with Joe Biden:  He’s not taking sides, but he has said that it is “critically important” to maintain the Northern Ireland peace process and respect the Good Friday Agreement.  This comes as he and Irish Taoiseach Micheál Martin had a St Patricks Day video conference in which both leaders spoke warmly of the relationship that they have and pledged to work more closely together.  Though the US has said it is a UK-EU issue to be resolved directly, his words won’t be lost on Westminster, who are courting the US for a trade deal and hope to get it ahead of any expanded US-EU trade deal which might now be on the table under the new administration.

UK-EU relations might have been tested a little more yesterday as Ursula von der Leyen said reignited the possibilities for Europe to block exports of vaccine to countries that don’t send doses to the EU that are manufactured in their countries. There wasn’t a direct mention of the UK, but given that we’ve received more than ten million Pfizer shots and not sent any AZ vials in the opposite direction, we didn’t really need a name check!  The EU will discuss their strategy at a summit next week, but Dominic Raab has warned that “the world is watching”!  He also said this caught our government by surprise, but perhaps that was the intent from the EU, given we’d done the same with our unilateral Northern Ireland Protocol extension!

No sooner had we said that the UK was on for a bumper few weeks of vaccinations, did we hear from Matt Hancock, who has now warned that there will be delays in getting the under-50’s vaccinated.  As well as possible supply side issues, the second doses of those given the jab in January become due and that will take up available resource.  The plan is still to have all adults taken care of by mid-July, but we can’t now expect a linear delivery and therefore an accelerated timeline.

Elsewhere in the world:  North Korea have said that the they will ignore Washington all the while they continue with their “lunatic theory” of denuclearisation.  The US is about to complete their policy review on the country, but have preliminarily said that because of their reengagement with allies in the region, they are in a better position to address the security challenges.  North Korea have said they will respond to power with power and to goodwill with goodwill.

A major factor in anything North Korea is China and the first meeting between US secretary of State Antony Blinken and China’s top diplomat, Yang Jiechi, takes place today, in Alaska.  The agenda for the meeting could be infinitely long and there is a huge amount at stake for both countries’ long term development strategies, so as much as they probably want to play hardball with each other on everything, they will need to show some willingness to cooperate in order for both sides to be able to walk away from this in a positive frame of mind.  The South China Morning Post has a good rundown.

The market will be watching the Bank of England monetary policy announcement today, where we’re expecting Andrew Bailey to be less dovish than he normally is. He’ll need to strike a balance, as the Fed have, with positivity around where we are, but highlighting the risks of complacency and the need for the Bank to be ready to act at a moment’s notice if things don’t progress as forecast.  We’d also expect investors to be keeping a very close eye on the US-China talks, as you’ll recall how sensitive prices were to the trade war rhetoric of the last few years.

Be well

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