Goodbye and Good Riddance

Juncker running scared

Jean-Claude Juncker has written a few books but none with such a telling title; Ruling Europe! He has managed to do what kings, Czars, Presidents even Fuhrer's have failed to, conquered Europe and what's more he has not ordered a single drop of blood to be spilled.

Junckers’ “State of the Union” speech was a shameless promotion of a Federal Europe where unelected officials can run amok promoting straight bananas, water that doesn’t rehydrate and banning Champagne that isn’t made in that tiny region of France. He clearly has no truck with colloquial terms like Hoover, Kleenex or Band Aid (the sticking plaster not the pop concert).

Juncker was also at pains to wish goodbye not au revoir to the U.K. from the EU making his feelings perfectly clear. He stated his opinion that the U.K. will quickly see that it has made a grave error in leaving the EU and the remaining twenty-seven will quickly move on. This all sounded a little like whistling in the dark as the focus of Brexit has been squarely on the effect o will have on the U.K.

He unveiled a plan to merge his role with that of Donald Tusk the European Council President to (presumably) give himself greater power. This idea was quickly slapped down by the Danish Prime Minister who emphasized the checks and balances inherent in the separate roles.

MPC to be unchanged but vigilant.

Today’s meeting of the Bank of England's Monetary Policy Committee will leave interest rates unchanged, most likely by a vote of 6-2. Were Andrew Haldane, The Bank’s Chief Economist change his vote and make the score 5-3, the pound would continue its recent correction/rally since Mr. Haldane exerts considerable influence.

The biggest shadow however, is cast by the BoE Governor Mark Carney who has the task of explaining following the meeting why despite inflation “going through the roof” that the MPC in general and he remains sanguine particularly since real wages are falling by close to 1%.

Mr Carney could change tack a little to give a boost to sterling changing his continued mantra about inflation being a consequence of a weak pound to something along the lines of “the pound giving concern but Brexit headwinds are too strong for a change although his committee will remain vigilant.”

Sterling has broken through the 0.9000 level versus the common currency but any rally will be hampered by strong resistance close to 0.8930 which proved very stubborn on the way up but was eventually broken as Euro strength started to accelerate.

U.S. inflation to remain benign

Inflation has been the single blot on the landscape of a further interest rate hike in the U.S. to follow the two this year and one last, that have slowed if not halted the rise in the stock market.

Permanent FOMC Member Lael Brainard a renowned dove was recently quoted as saying that monetary policy should remain on hold for some time and that the Fed needs to “pay careful attention to underlying inflation before raising rates”

The dollar index has been rising from its recent multi month low but faces a major challenge to break resistance a little over 93.00.

Eventually the President will provide an economic stimulus package but that will now be next year and may be on the prevailing themes for 2018. In the meantime, the common currency remains on the defensive as the greenback breaks through the 1.2000 level but it will face a tough time breaking 1.1820 which will, coincide with close to 93.00 for the index.