No “Patience” Doesn’t Mean Impatience
There’s never a quiet day on the markets and yesterday proved just that. Whilst in the UK, all eyes were on the last Budget of this current Parliament, elsewhere, Janet Yellen and Fed terminology very much took centre stage.
In the UK, Chancellor Osborne produced, as anticipated, a very political budget. Whilst it was seen as FTSE 100 positive, it was not necessarily Pound positive. Details which may have been expected to help GBP such as news that public spending cuts could end a year earlier than predicted should have given Sterling a boost, but this was not the case. This is probably because it has focussed investors minds on the May 7th general election. Markets do not like political risk and as rosy as the outlook may be at the moment it may be irrelevant as the economic landscape could change as of May 8th.
Further news out of the UK has seen underwhelming jobless claims and a subdued increase in weekly earnings.The MPC pointed out that pay growth is still below rates necessary for inflation to return to its target and that the recent strength in the Pound may further raise the risk of a prolonged period of inflation.
In the US, Janet Yellen threw a bit of a curveball as she paired the much anticipated removal of the term “patient” from future policy with a huge caveat that this doesn’t mean that the Fed will be “impatient”. It was confirmed that the Fed would raise rates when it was confident that low inflation was on track to return to its 2% target. There was also a denial that the Fed had decided upon the timing of the next rate hike. This sent the currency markets into a spin and we saw huge swings in the US Dollar in the US markets, after we had all gone home. This seems to have stabilised somewhat now.
Today we have more Greek debates and jobless claims from the US hogging the headlines.