News in last night that a deal has been done and it will be signed on Tuesday next week. Glossing over last week’s NATO spat, POTUS spoke to Canada’s Justin Trudeau and neatly just as the increased tariffs are due to be imposed next week, a rabbit has been pulled out of the hat and all is apparently agreed. The USD weakened slightly yesterday suggesting that the market having been here before is awaiting hard news rather than a series of Tweets.
Some of us thought this had been debunked when the idea was floated after the 2008 financial crisis. At that time it was thought to be a wonderful way to recapitalise the financial system. In addition to Bonds and Equities some thought it a fantastic plan to apply it to Foreign Exchange and Derivatives. Well it has not gone away. Yesterday German Finance Minister Olaf Scholz re-introduced the idea claiming it would generate EUR 1.5 Billion in Germany alone which could be used to pay the cost of a new pension. In a well orchestrated manoeuvre the French Finance Minister welcomed the idea and thought it should be introduced quickly. Entering the debate wounded Chancellor Merkel suggested it should just apply to Equities as Frau Merkel is naturally anti Anglo Saxon free market economics. Watch out as if there was a UK Labour led coalition it is a nailed on certainty that a so called Tobin tax would be introduced in the UK.
As trailed here a few weeks ago, the consultation is happening. The aim is to improve staff diversity and “the mental well being of traders”. This week in particular with a long election night at the desk in prospect, the SGM-FX crew are looking enviously at their fellow Equity market friends and suggesting that they too might beneficially become more diverse with shorter hours. Euan in particular was keen on the diversity point until it was explained that an influx of lady colleagues of child bearing age might have some implications for him and his job security. At which point he argued that his mental well being might be improved. Nice try, Euan!
Last night the market awaited the YouGov poll which was released at 10pm. The poll based on multilevel regression and post-stratification (no me neither) is closely watched because this type of poll has historically been the most accurate of the polls. The last one on Nov 27 showed a 68 seat Conservative majority. This one showed that the Conservatives would have a working majority of 28. Looking at the small print, that working majority was qualified by an error factor which could narrow that slimmer lead still further. GBP nervous and consequently slightly weaker this morning.
Discussion and Analysis by Humphrey Percy, Chairman and Founder