Morning Brief – ECB President

ECB President

As predicted, Mme Lagarde, President Christine Lagarde yesterday stuck to her existing line that it was all much too early to talk about interest rate cuts in the Eurozone. The market or rather 60% of those polled are holding out for the first such rate cut occurring in April. Maybe that 60% should also factor in Mme Lagarde’s comments about the 2008 Global Financial Crisis which paraphrased are that if women had managed the world’s financial system rather than men, the crisis would not have occurred at all. Academic over 15 years later but good politics for Christine Lagarde and, given her ambitions, politically astute. However, leaving that aside and back to EU interest rates, it would be most unlikely for the ECB President to take any measurable risk both for inflation and her aim to move next to the Elysee Palais. Interest rates will only be cut when there is bulletproof evidence that the data supports that.
EUR/USD 1.0845.

US Growth

Few would have predicted that the US economy would grow 2.5% for 2023. Fewer still would have expected that Q4 2023 would see the economy forge ahead and show 3.3% growth. Good news also on inflation with personal consumption expenditure-the measure closely watched by the Federal Reserve- grew at a rate of 2%.
USD/JPY 147.35.

Big Mac Index

As we have written before, this index produced by the Economist newspaper for the past 38 years is one measure of Purchasing Power Parity but not the measure of a currency’s overvaluedness or undervaluedness versus USD. Recently published, the Index as is customary shows CHF or Swiss Franc being overvalued by almost 50% but on the undervalued side, one currency does stand out: Chinese Yuan or CNY. Although Chinese MacDonalds customers enjoy the same range of hamburgers as the USA, products such as congee or boba tea are not on offer to US customers. What is striking this time is that the CNY is the most undervalued that it has been versus USD since 2009 at 44%.
USD/CNY 7.1665.

Nicola Sturgeon and Boris Johnson

It is not often these days that both these two disgraced and ex to everyone else except maybe themselves politicians feature in a story. This time it is the Covid Enquiry that drags on-and on- and pruriently has been reduced to sifting through the then First Minister of Scotland’s text messages in respect of the then UK Prime Minister. Plenty of expletives, adjectives such as incompetent and a noun: clown. Not that Nicola Sturgeon will worry but her texts should ensure no Christmas card in 2024 or indeed ever again from BJ.

Walk Like A Man

Released this day in 1963 and written by Frankie Valli, this song is as good today as it was 61 years ago when the Four Seasons made it a smash hit upon its release:

Ooh-wee-ooh-ooh-ooh-ooh-ooh, ooh-wee
Walk, walk, walk, walk
Ooh-wee-ooh-ooh-ooh-ooh-ooh, ooh
Walk like a man

Oh, how you tried to cut me down to size
Tellin’ dirty lies to my friends (ooh-ah, ooh-ah, ooh-ah, ooh)
But my own father said give her up, don’t bother
The world isn’t comin’ to an end

(He said)
Walk like a man, talk like a man
Walk like a man, my son
No woman’s worth crawlin’ on the earth
So walk like a man, my son

Oh wee ooh-ooh-ooh-ooh-ooh, ooh-wee-ooh
Walk, walk, walk, walk
Ooh-wee-ooh-ooh-ooh-ooh-ooh, ooh

Bye, baby, I don’t-a mean maybe
Gonna get along somehow (ooh-ah, ooh-ah, ooh-ah, ooh)
Soon you’ll be cryin’ on account of all your lyin’
Oh yeah, just look who’s laughin’ now

(I’m gonna)
Walk like a man, fast as I can
Walk like a man from you
I’ll tell the world, forget about it, girl
And walk like a man from you

Discussion and Analysis by Humphrey Percy, Chairman and Founder

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