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Morning Update

Word of the week Wednesday, global temperatures for March 2024 beat records, legislative elections for South Korea.

Word of the Week Wednesday

DXY: A volume weighted index of the value of the dollar against a basket of currencies. Currently the basket consists of the Euro, Swiss Franc, Japanese Yen, Canadian Dollar, British Pound and Swedish Krona.

Hottest March on Record

Research from the EU’s climate service has shown that March 2024 was globally the warmest March on record while global sea surface temperatures were also at record highs. Here, the Copernicus Climate Change Service identified that March was 0.73°C above the 1991-2020 average, 0.10°C above the previous March record in 2016 and was 1.68°C above the pre-industrial (1850-1900) average.

This was also the tenth consecutive month in a row that saw global temperatures breach new average records. Following months of records being broken, between April 2023 and March 2024, global warming reached 1.58C above the pre-industrial average.

This comes against the target laid out during the Paris COP21 conference in 2015 which saw leaders around the world pledge to keep global warming within a 1.5C threshold of preindustrial levels.

The survey also identified that the global average sea surface temperature rose to a record high of 21.07°C with the survey stating that “the global average sea surface temperature is also at a record high level at 21.07°C”.

US Inflation

This afternoon we’re going to get US inflation numbers, which will be further fuel to the debate as to when rates might be cut. Interestingly (and I appreciate that ‘interesting’ might be a stretch when talking about monetary policy, but go with it…) the narrative is changing from “when will they cut?” to “will they cut?” as the US economy is on a very long winning streak and is showing little sign of slowing down.

Jobs data from Friday was significantly better than expected and other leading economic indicators are also showing the economy taking 5% base rates in its stride. If inflation stays sticky, then we could see expectations of a rate cut this year reduce from three to two, or one, or even none.

Supporting the idea that the Fed won’t be cutting anytime soon is JP Morgan CEO Jamie Dimon. He’s warned that interest rates aren’t a one way bet any more and that his bank are working on assumptions of a rate range of two to eight percent, possibly higher if inflation persists!

With the US really standing alone in terms of growth, they could also be alone in not reducing rates. If that were to be the case the almighty Dollar might get a further boost as it could end up commanding a materially higher interest rate yield than other currencies – with some analysts even saying that this could push the Euro to parity against the dollar as the differing pace of monetary policy plays out in the FX market.

South Korean Elections

Today millions of South Koreans are heading to the polls to vote in the country’s legislative elections. Here, the electorate will vote on the makeup of the National Assembly which is made up of: 253 constituency seats and 47 proportional representation seats (with 30 of these 47 seats being allocated via an additional member system and the remaining 17 via a parallel voting method).

It is understood that the rising cost of living, strikes in the healthcare system and corruption is amongst some of the country’s most salient political issues. Fertility rates are also becoming an increasingly important issue with South Korea having the lowest rate in the world at 0.68 and politicians looking for ways to address this.

The South Korean political environment has generally been dominated by two parties (People Power currently in government with 101 seats and the Democratic party who lead the opposition with 142 seats), however some analysts are citing how rising popularity for third parties may alter this landscape.

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