Bank Holiday Run Down
May 03, 2016
The controversial Transatlantic Trade and Investment Partnership (TTIP) deal between Europe and the US might have hit a major stumbling block, according to leaked documents, which the Guardian picked up on over the weekend. The US requires Europe to lower, or abandon altogether, certain environmental protections that would be a red line amongst a lot of the European public. TTIP is still a bit of an enigma to a lot of people, who are trying to work out whether or not it is a good thing for anyone other than large, multi-national corporations, and it's probably the sheer size of the agreement that makes it so difficult to work out what the agenda actually is. President Obama is still confident that its going to get signed and Brussels have said that the leaked documents are a 'storm in a teacup', so there seems to be plenty of political will to get it signed – though again, we're not sure at what cost.
The Bank of England are preparing for the referendum vote next month, with additional sterling auctions in place for the days immediately before and after the vote. Over the weekend S&P reaffirmed the UK's AAA rating, but kept in place a negative outlook because of the referendum. The fact that they have maintained the AAA status suggests to a few that the scales are tilted toward remaining in the UK, which also seems to be the outcome the markets are leaning toward when it comes to dealing with Sterling. The Pound has seen a respectable recovery from its lows of last month and there might still be some momentum left in the short term – though we're yet to see a poll which shows there's no need to worry (and even if we did see one, we'd be hard pushed to believe it(
The European Central Bank have hit back at the German lambasting of ECB monetary policy. Central Bank member Coeure said that “thanks to improved economic conditions, stimulated not least by monetary policy, real income and unemployment in Germany have increased in recent years”. German officials have apportioned some the rise in the right wing AfD political party on the ECB, saying that their policies have caused “extraordinary problems”. AfD, now the third most popular party in Germany, had their second annual party conference at the weekend, where calls were made to leave the Euro, block turkey's entry to Europe and, most controversially, ban certain Islamic practices as the call to prayer and wearing a full face veil in public, saying “Islam is not part of Germany”. Angela Merkel has repeatedly criticised the party's policies, but the swift rise in the right wing is as worrying as that of the Front Nacionale in France.
Speaking of racists; Donald Trump is facing down a coalition of opposition now, as Ted Cruz and John Kasich have joined forces to try and at least get to the Republican convention without an outright victory by Mr Trump. The coalition though is proving pretty unpopular amongst voters and is quite the gamble by the remaining opponents to get Trump stopped. The Indiana Primary takes place today and is seen as a must win for Cruz and Kasich if they're to have a chance of pulling off their plan.
The US government has put Germany, china and Japan on its foreign exchange watch list. The Treasury Department said that the countries satisfy two of the three criteria of foreign exchange practices that put the US at an unfair trade disadvantage. We doubt being put on the naughty list is going to change any of their practices and with Japan witnessing relentless Yen strength, they will almost certainly have to do more in the market to bring the Yen down which they'll hope will push the Nikkei higher.
The ECB, in a working paper, have said that of the 21 market moving data releases from the US, 7 look to have been leaked, judging by the market movements ahead of the official announcements, which show “substantial informed trading”. Market Watch has the story.
Overnight we've seen Australia cut rates to below 2%for the first time. The RBA had previously spoken of an easing bias if “continued low inflation would provide scope for easier policy”. This wording was removed from the statement this time round, signalling that this could be the end of the road for rate cuts.
Oil is back up this morning after falling over yesterday's sessions. The fall was caused by increased Middle East supply. Iraq shipped an average of 3.6million barrels per day in April, up from 3.286 million in March and there are reports coming from Saudi that they're turning the taps on to increase output from 10.15 million to 10.5 million in the next few weeks. Oil in the mid $40's seems to be a profitable level, at least in the Middle East, though we'rer not quite sure US Shale can do much below $50.
Data this week isn't too fast paced, but European retail sales and producer prices might peak a bit of interest and then Friday's Non-Farms numbers will provide the highlight.
Have a great week.