The Fed rate cut narrative is continuing apace, with falling inflation adding further fuel to the fire. Meanwhile, Boris Johnson’s charge towards Number 10 kicked off today, with widespread support based on his chances against Corbyn as much as in Brussels. 

•       Markets slide despite rate cut narrative being enhanced by falling US CPI
•       US crude inventories continue theme of overproduction in US
•       BoJo shows his face, yet his appointment would likely be a precursor to a general election

Global markets are on the slide today, as market optimism over looser monetary policy and a resolution to the US-Mexico rift wanes. The focus on US interest rates has been once of the driving factors behind the recent stock market rally, and the recent inflation data plays into that same narrative over growing expectations of lower US rates. With last week providing sharply lower payrolls figures, this week has provided the second half of the story, with PPI and CPI inflation both falling, providing breathing room for further monetary expansion. Interestingly, we have seen both core and headline inflation decline to highlight that this shift is more than simply a reflection of falling oil
 prices. However, that decline in energy prices remains a key determinant for the global shift lower in rates, with today’s rise in stockpiles indicating the potential for further declines in crude prices. The past five weeks of inventories have come in well above market estimates, and with US production at record highs there is a fear that the slide in energy prices will continue unabated unless OPEC do something drastic. 

Boris Johnson finally showed his face today, promising little and delivering scant details on his vision of Brexit. Markets showed some relief at the front-runner’s insistence that a no-deal Brexit is a last resort, yet BoJo’s inability to explain how he will break the Brexit deadlock highlights that he is all style and no substance. For Tories, this vote is as much about who can keep them in power as it is about delivering Brexit, with Labour’s attempt to legislate against a no-deal Brexit little more than a thinly veiled move to force a general election when talks inevitably break down. The deal will not change, parliament will not approve the current deal, parliament will reject a
 no-deal Brexit, and ultimately we will see a position where a referendum or general election is the only way forward.

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