All the action in markets yesterday surrounded sterling and the UK Gilt market where the pound ended the day -1.3% and 10-year gilt yields lower by 3.5bp as the market moved up the chances of a no-deal Brexit to around 50%. Boris Johnson, digging in his heels on a no-deal, and the constant squabbling from many differing parties caused the sell-off with few expecting any respite over the coming weeks.
Across the pond in very subdued trading it was another leader, President Trump, claiming all the headlines as he continued his tweeting with the Federal Reserve firmly in his sights ahead of tomorrow’s rate announcement. Tweet one “The EU and China will lower interest rates and pump money into their systems, making it easier for their manufacturers to sell product. In the meantime, and with very low inflation, our Fed does nothing- and probably will do very little by comparison. Too bad!”
Tweet two stepped up the pressure. “The Fed ‘raised’ way too early and way too much. Their quantitative easing was another big mistake. While our country is doing very well, the potential wealth creation that was missed, especially when measured against our debt, is staggering. We are competing with other countries that know how to play the game against the US. That’s why the EU was formed …and for China, until now, the US has been ‘easy pickens.’ The Fed has made all the wrong moves. A small rate cut is not enough, but we will win anyway!”
We guess the president is in the 50bp cut camp, which even with his tactics to sway the Fed, is still unlikely. However, we shall see at 7pm London time tomorrow evening when Chairman Powell, one of Trump’s least favourite people, and the remainder of the FOMC announce their actions.
Here at Stratton Street, we are having a sweepstake as to how long it takes the President to abuse the committee via Tweet, I am on ten minutes past 7pm.