The attractions of a central bank giving forward guidance on interest rate policy were based on predictability amid stable monetary conditions. Now that has all gone out of the window and what is essentially a problem of the central banks’ own making is looming large. The idea is that through Delphic language the central banks should manage market expectations and in return the world’s largest financial institutions should behave in accordance with the forward guidance. First out of the box in the line up of increasingly uncomfortable central bankers is Chairman Powell of the Federal Reserve who has just announced that it is all a bit hard as forward guidance may be subject to change in the light of different circumstances. In other words Chair Powell is somewhat sheepish as his forward guidance has proved to be somewhat less than guidance and rather more optimistic hopes. At least he can console himself that his global peers will have to eat equal sized slices of humble pie- no consolation to everybody suffering from the worst inflation for 40 years. EUR/USD 1.0125
Unfortunately especially for Germany and Europe as we all know Germany does not have gas of its own. Things have got (even)worse for Germany overnight with the Nordstream pipeline being reduced from 40% of capacity to 20% in what is being piped. Politically this is toxic- blame.
Economically it is disastrous- cost and effect on the German industrial machine. Socially this reduction will almost certainly lead beyond voluntary cuts to rationing and what in a modern democratic leading nation has hitherto been unthinkable: consumer prioritisation by the state. Until recently German gas reserves had been increasing but that increase has not only plateaued but reversed which does not bode well ahead of the winter. GBP at least benefitting from EUR pain with GBP/EUR 1.1823.
Tempted to put your foot down in your Ferrari 458 Italia with less than 2000kms on the clock ? Feel the vibration of the 4.5 litre V8 engine as you see the horizon approaching at 320 kph, sure, just don’t do it in the Czech Republic unless you are prepared for your pride and joy to be confiscated, modified with Police decals and turned into a Police chase vehicle which is exactly what those sense of humour challenged Czechs did this week to one unlucky punter. Equally firm are the wider Czech population with no sign of a softening in the stance of Czech Republic‘s strong opposition to joining the Euro and EUR/CZK 24.59.
John Denver singer songwriter and he of the ill-fated final microlight flight high above the Pacific Ocean plus claim to fame for being an eco-warrior before it became fashionable, released this song in 1974 when it filled the airwaves with his warbling vocals non stop every day that year in the month of July and very often in subsequent months.
You fill up my senses
Like a night in a forest
Like the mountains in springtime
Like a walk in the rain
Like a storm in the desert
Like a sleepy blue ocean
You fill up my senses
Come fill me again
Come, let me love you
Let me give my life to you
Let me drown in your laughter
Let me die in your arms
Let me lay down beside you
Let me always be with you
Come, let me love you
Come love me again
Let me give my life to you
Come, let me love you
Come love me again
Discussion and Analysis by Humphrey Percy, Chairman and Founder
Eurozone That was a surprise: yesterday the EU announced that inflation had fallen to 2.4% which was considerably better than the 2.7% that markets had expected. Despite the ECB saying it was far too early to cut rates, the market has pencilled in the first cut for April. Before getting carried away it should be […]
Data Day Despite salient data already having been published in China and France so far this morning, we are far from finished with the deluge of data due to reach the market today. The most important of which will be those that we have signposted in earlier briefings: Eurozone and US inflation figures. Given just […]
UK Labour market The Bank of England yesterday broke cover to drive the message home that due to the UK’s labour market remaining tight, it was premature to start talking interest rate cuts and it was not just Governor Bailey who was calling for higher for longer interest rates but also his MEPC colleague Jonathan […]