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Friday Feeling

The “will they won’t they” debate came back to the Federal Reserve last night as Fed Chair Powell

The “will they won’t they” debate came back to the Federal Reserve last night as Fed Chair Powell voiced his lack of confidence that they “have achieved sufficiently restrictive stance; if it becomes appropriate to tighten policy further we will not hesitate.. we will decide on a meeting-by-meeting basis and continue to move carefully. Achieving the 2% target has a long way to go… continued inflation progress isn’t assured”. The statement lent some weight to the dollar which has had a bit of a rollercoaster week (relative to the benign trading activity over the last few months at least). We’d perhaps suggest that this is a bit of posturing from the chairman, who would like to turn his back on actual rate rises, but needs to convince the markets that inflation is still an issue. The dollar weakened recently on expectations that the first rate cut from the Fed would be brought forward from July next year to June and there will no doubt be concern from the Fed that if that theme were to perpetuate that markets might trade in a way that makes monetary policy looser and risk things heating back up.

UK

On this side of the Pond chief economist at the BoE, Huw Pill, has said that rates are high enough to tackle inflation, but that “we need a persistent level of restriction over the next extended period” (read: these aren’t coming down for a while). As a reminder, Rishi Sunak needs inflation to be at 5.3% by the end of the year to meet one of his five pledges. The CPI print for October is due next week, where markets are expecting a print of 4.8%, a big drop from the prior month’s 6.7% as last year’s Ofgem energy price cap increase falls out of the 12 month data – so if this hold’s he’s on target.

Mr Sunak has possibly got other things to worry about at the moment, as Suella Braverman is practically goading him into sacking her. Following an op-ed in the Times from the Home Secretary, which Number Ten asked her to revise the copy but to which she refused, the PM has said that the situation is under review but as of writing this morning Ms Braverman is still in her post. The dilemma for the PM is that it was with her support (following her conveniently timed self-removal from the Truss government) that he got into power in the first place and if she were to be sacked it would leave him with another senior MP hurling shots from the back benches and galvanising support from the right of the party, which he can ill afford to lose. But the damage she’s doing as a minister at the moment puts him squarely between a rock and a hard place.

Europe

Portugal are to hold a snap election after their PM tended his resignation following a corruption investigation. Antonio Costa handed in his notice after police arrested government officials and raided businesses earlier this week in an investigation into a wide scale corruption involving lithium mines. Mr Costa had a vision that Portugal would be the lithium producer of Europe and had granted mining concessions to multiple companies. The investigation is focussing on two mines in the north of the country.  With the PM resigning, the country’s plans to overhaul its expat tax status and also its privatisation of some state assets has been paused and it won’t be going to the polls until March now, which will feel a very long way away – particularly for IAG and KLM, who would both dearly love to buy a slice of Portugal’s state owned airline, TAP. The FT has more Portugal’s economic plans in disarray after PM resignation

Gaza

Israel have agreed to a series of four hour pauses to the fighting to allow civilians to flee. It’s also been reported that chiefs from Mossad and the CIA are in Qatar trying to negotiate a hostage release deal, by where 10-15 hostages will be released in exchange for a one to two day “humanitarian pause”. Iran’s foreign minister told his Qatari counterpart that “due to the expansion of intensity of the war against Gaza’s civilian residents, expansion and scope of the war has become inevitable”. Israel has hit a number of Hezbollah sites in South Lebanon in response to missile and rocket attacks.

Looking to today: We’ve had a preliminary reading of UK GDP for Q3, which came in at 0% growth… though that is an improvement on the -0.1% the market was expecting. So far year to date the economy has grown 0.6%. Manufacturing data has also come in just above expectations, but we’re definitely not setting the world alight. That’s pretty much the economic data drop for the day, so we look to Fed and ECB speakers this afternoon for any economic sentiment they wish to impart, otherwise it’ll be geo-politics, oil prices and investor sentiment driving the wider market.

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