• richard evans

Swedish PM falls short of Merkel's 16 years as leader

Good morning

Happy thanksgiving to our readers across the pond. Could be a quiet day ahead, certainly come the afternoon, but for now the US dollar remains supported, helped by another Fed official, this time Daly, who talked of a faster pace of reduction in asset purchases. Daly is regarded as pretty dovish so for her to consider a more hawkish tone is quite telling. Fed minutes released yesterday did show that members discussed the possibility of accelerating the tapering process, so the recent comments from Fed officials could be seen as preparing the markets. FOMC see inflation higher than previously thought and likely to remain higher for longer. The FOMC meeting in December will draw a lot of attention. By then however we may have a better idea of how a fifth Covid wave is affecting the US. It is not looking good, risks certainly to the downside so quicker Fed tightening is not a certainty.

ECB minutes today may show the difference between ECB and Fed. They are expected to show ECB more against tightening than some other central banks. This should not be a surprise and I wouldn’t expect to see a major shift in EUR, instead perhaps just confirming the divergence on some central bank views. EURUSD did slip below 1.1200 yesterday evening but is now 1.1225, GBPUSD dipped to 1.3320 but is now 1.3345, EURGBP now 0.8410 (GBPEUR 1.1890).

German political parties have agreed a new coalition and with it comes a new Chancellor to replace Merkel in the first couple of weeks of December. Merkel has led Germany since 2005 and is still widely popular. She has certainly had her ups and downs but overall I think she has been a great leader for the country and her replacement, Mr Olaf Scholz, has a big task ahead of him. He arrives as the country faces an alarming rise in Covid numbers, yesterday Covid cases increased by 75,000, up from a rise of 65,000 the day before, while the number of deaths in Germany from Covid breaks the sad 100,000 barrier.

From one female leader to another, one who has been in her role for sixteen years and one who could manage just a few hours. Sweden’s first female Prime Minister, Magdalena Andersson, was appointed yesterday but her coalition partner left the government after she failed to get her budget through parliament, who instead voted for a budget put forward by the opposition. I am no expert on the Swedish political system, but it seems it is likely she will have the chance to be voted in again, but for now there seems to be quite a right/left divide .

Merkel was due to push for a new two week lockdown for Germany but those plans seem to have been put on hold since the new coalition talks. France are due to give an update on its Covid plans today and are likely to bring in some new restrictions but it is thought they will not introduce a lockdown unlike some of its EU cousins.

So, Thanksgiving. This used to be one of the finest days in the City, the markets would all but shut down by lunchtime and we’d all sneak off for a boozy lunch. Not quite the same these days. I’m at home, the kids have a couple of days of school, can’t quite fathom why given the number of holidays they already have. Teacher training is the excuse this time although I do wonder whether the tables have turned and they will be the ones sneaking off for that boozy lunch.

- 09.00 ECBs Schnabel speaks

- 12.30 ECB minutes

- 13.30 ECBs Lagarde speaks

- 17.00 BoEs Bailey speaks

- 23.30 Japan Tokyo CPI

- 00.30 AUS retail sales

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