In the age of populism hard for central banks to be independent. Show one central that is or has been
Archives of “April 2019” month
rssWhat happens now as Brexit day gets extended (again) to 31 October?
Danske Bank says a further extension is likely but it’s hard to back any one scenario to be a winner given current circumstances
h/t @ RANSquawk for the picture
And I certainly don’t disagree with Danske on that front. As it stands, there just isn’t a clear solution to break the Brexit impasse and there isn’t any clear way forward as long as May remains prime minister.
For the moment, UK lawmakers will be set for a break in conjunction with Easter next week from 16 April to 23 April so I would expect any steps forward in the Brexit saga to only come about after that.
The real issue with European leaders allowing an extension to Halloween Day is that it just solidifies the notion that all parties are wanting to avoid a no-deal and that they will extend this for as long as it takes to find a majority on something else. And that means another possible extension if we’re still stuck down this same road in six months’ time.
In the mean time, May is continuing to pursue cross-party talks but with Labour unlikely to move their red lines, she either has to cave in and lean towards a customs union or try and work on her original deal again for a third time.
The latter option is likely to draw heavier scrutiny this time around as it was dead on arrival already in the past two attempts, which means if talks with Labour fail, we could be seeing the end of May’s reign as prime minister.
In the bigger picture, the problem with rolling extensions is that eventually this is going to take a toll on the UK economy in a really, really expensive way. That’s when lawmakers will have to question “where do we draw the line?”. I reckon that is where potentially a second referendum and calls to revoke Article 50 altogether will come into play.
Otherwise, the UK risks economic suicide if it continues to play this game of limbo with no clear way to successfully make it to the other side.
Eurostoxx futures flat in early European trading
Sluggish tones observed in early trades
- German DAX futures -0.1%
- French CAC 40 futures +0.2%
- UK FTSE futures -0.1%
- Spanish IBEX futures +0.1%
This very much feeds into the indecisive/mixed tones seen in Asian trading but the magnitude of the moves reflects that of US equity futures, which are trading flat, for now. The tone here is helping to keep currencies steady with USD/JPY near unchanged levels at 111.07.
Nikkei 225 closes higher by 0.11% at 21,711.38
Tokyo’s main index closes slightly higher in mixed session for Asian equities
Asian equities are wrapping up the session in mixed fashion as Japanese stocks post gains while Chinese stocks are lagging on the day. The Hang Seng index is down by 0.8% currently as softer tones due to global growth worries are prevailing among Chinese equity investors.
That said, overall risk sentiment remains more balanced with US equity futures barely changed on the day and bond yields also not really moving as we begin the European morning. That should keep yen pairs generally stable to start the session with USD/JPY still holding near unchanged levels at 111.07 currently.
IMF says that undermining central bank independence would be dangerous
IMF’s Tobias Adrian, speaks in relation to Trump’s recent criticism of the Fed
- The Fed is set up as a very independent institution
- ‘Dangerous’ consequences if Trump’s calls lead to monetary policy mistakes
- Says that IMF is in support of Fed’s current policy stance
- Investors should take recent yield curve inversion seriously
The only thing that strikes my mind when it comes to this issue is that Trump’s criticism may inadvertently force the Fed to be less independent in order to prove their independence. It sounds convoluted but if Fed officials are upset by getting pushed by the guy in the Oval Office, they may very well just stick to their guns despite the US economy starting to send warning signals in recent months.
Pigs are dying in China – that means pork prices will be higher
Five Fed officials on the speaking agenda Thursday
Federal Reserve System Vice Chair Richard Clarida is speaking on the U.S. Economic Outlook and Monetary Policy, so that will contain pertinent remarks.
- New York Fed head John Williams is to speak at a housing development conference
- Michelle
- Michelle Bowman is a Governor on the Federal Reserve board, speaking in San Francisco
- James Bullard is the president of the St. Louis Fed.
- Neel Kashkari, Fed chief, is conducting a Twitter Q&A
Packed agenda!
More on Kim Jong Un urging ‘severe blow’ to those sanctioning North Korea
More:
- told his party to push “self-reliance”
- signaling his determination to hold the line in talks with U.S. President Trump
- Kim told Workers’ Party of Korea officials Wednesday that the country should strike at those who thought they could make North Korea surrender through sanctions, without elaborating, the state-run Korean Central News Agency reported Thursday
Here is the link to Bloomberg with more if you’d like it
How I know it’s spring.
Yen traders – heads up for potential North Korea headlines today
North Korea’s ruling party central committee will meet in a plenary session Wednesday.
Per report from the Korean Central News Agency, i.e. NK state media.
News that NK has continued developing nuclear weapons and delivery systems (ballistic missiles, missile-capable submarines) have hammered home the naivety of the ‘summits’ called by the US administration. If NK ramps up aggression you can expect that to be a positive input for the yen on a ‘flight to safety’ (liquidity) basis.
Winners are grinners.