Morning Brief – Inauguration

Inauguration

Passed down from Latin, to French and an English sounding ‘al’ stuck on some time in the late 17th century, inaugural is a word that had carried a similar meaning for a long time. The Roman and Greek picture of an inauguration involved an augur (appropriately named) watching out for natural signs like the behaviour of the birds or a change in the wind to see if the candidate had the will of the gods to fulfil the position the people had elected him/her to. It’s a bit of a far cry from ‘JLo’ singing from the podium to an empty crowd. Fortunately for President Biden, her high notes didn’t scare off the birds and force the augur to condemn his election against the will of the gods…

Joseph Robinette Biden Jr. has now been confirmed as the 46th President of the United States. Our modern day augurs appeared to bypass the constitutional requirement for a transition of power at 12pm London time exactly, with Mr. Biden being addressed as Mr. President a handful of minutes before. The pause that followed the short and sweet swearing in process didn’t stop the BBC presenter falling into a state of confusion and disarray as she wondered whether a 10 minute pause was now due and what on Earth she was supposed to do with it.

Following a term of division and recent chaos, the inauguration may have meant much more than usual for many US citizens. Indeed those that have felt the wrath of Trump’s policies abroad may too have focussed on the transition of power more than they usually might have. As expected the hours leading up to the inauguration ceremony were characterised by USD buying. Early session Dollar weakness met strong resistance at 1.37 and 1.215 versus the GB Pound and Euro respectively. The Dollar peaked immediately following Biden’s inauguration as the risk of civic unrest and disturbance subsided. The new President enacted as many as 15 executive orders immediately upon being sworn into office to set the course of his own administration. It is customary for an outgoing President to leave a note for their successor. The White House has confirmed this to be the case in the recent transition but has not released its contents to the public. My bet is on ‘MR Biden, you’re fake news’. Time will tell.

A policy decision at the ECB today will be pivotal to the Euro. No policy change is expected by the market either to interest rates or the asset purchase program (QE). Therefore any signs of deviation or comment on the Euro from President Lagarde could unsettle the single currency. The valuation in the euro however suggested that the meeting in combination with the EU summit presents risk to the Euro that is being reflected in its price this week. The potential for Lagarde to surprise us with an expansion in the QE program or a significant move forward in the bloc’s vaccination program could move the Euro dramatically.

Discussion and Analysis by Charles Porter

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