Daily Brief – After the US Elections

After the US Elections

It’s early days but here are just 4 conclusions that can be drawn from the swings to the Democrats in the US: 1. Some optimistic Europeans and also the EUR jumped to the conclusion that a weakened POTUS would mean the reversal of some tariffs on the EU: it will not, as POTUS still has unilateral power to impose tariffs rather than Congress. 2. Funding for Ukraine from the US may be re-instated: this may well happen BUT while funds may be approved by Congress, POTUS may not necessarily sign off on the spending given what he has said and his antipathy to the Ukrainian President. 3. The US Debt Ceiling, the legal cap on how much the US can borrow: entrenched opinions and deep divisions now exacerbated will mean that it will take longer to achieve consensus which will push up the cost of US borrowing further.4. As alluded to above the EUR has strengthened following the Elections but in part due to higher US interest rates and in part due to the ongoing headwinds of inflation, political uncertainty, France and upcoming EU elections, the present USD falls will be reversed.

EUR/USD 1.1235.

Bank of England

Yesterday lunchtime the expectation was for a hike of 25bps in UK rates although there was a question as to whether the Monetary Policy Committee would continue to sit on its hands and ignore higher inflation due to the precipitous drop in oil prices in the past week(see below). As a reminder the MPC has hinted previously that the original plan was to cut interest rates by 50bps in 2026 and by not raising rates as much as they might have, that in practice, doing nothing represents a tightening. Such is the arcane world of central bank policy making. In the event, Governor Bailey and his Committee did raise rates as expected, envisaged inflation rising to 5% next year and warned that there would be further rises should the US-Iran conflict remain unresolved and energy prices stayed elevated.

GBP/USD 1.3459.

Oil

Following the US Elections, oil fell 9% on Wednesday amid hopes that a weakened POTUS and a Democrat Congress would not only talk about achieving peace with Iran, but achieve it. There is a smaller school of thought which suggests that the Elections results will encourage POTUS and Israel to escalate their attacks on Iran. As a reminder, on Friday of last week Brent Oil stood at USD 117.80 and just one week later it had fallen almost exactly 20% before rising 2% yesterday.

Brent Oil USD 97.56.

Return on Investment

Michael Bloomberg billionaire and proud Democrat put his money where his mouth was in Wednesday’s US Elections shrewdly putting down USD 75 million as a contribution to the Democrat PAC or Political Action Committee. The list of billionaires backing the Republican PAC is long and features some sizeable amounts ranging in size from USD 14 million up to USD 93 million. Way out on his own in every way was Elon Musk who must hold the record for the worst investment decision in the Election with USD 444 million in support of the Republicans.

GBP/EUR 1.1985.

Hung Up

This day in 2005 marked the release of this, Madonna’s 36th Top Ten Single which meant that she equalled the record set by the king, Elvis Presley. Not content with that, the song was Madonna’s 47th Top Forty release.

Every little thing that you say or do
I’m hung up, I’m hung up on you
Waiting for your call, baby, night and day
I’m fed up, I’m tired of waiting on you

Time goes by so slowly for those who wait
No time to hesitate
Those who run seem to have all the fun
I’m caught up, I don’t know what to do

Time goes by so slowly
Time goes by so slowly
Time goes by so slowly
I don’t know what to do

Every little thing that you say or do
I’m hung up, I’m hung up on you
Waiting for your call, baby, night and day
I’m fed up, I’m tired of waiting on you
Every little thing that you say or do
I’m hung up, I’m hung up on you
Waiting for your call, baby, night and day
I’m fed up, I’m tired of waiting on you

Ring, ring, ring goes the telephone
The lights are on, but there’s no one home
Tick tick tock, it’s a quarter to two
And I’m done, I’m hanging up on you

Have a Great Weekend!

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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