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USD catches a bid as Wall Street returns from long weekend


Well, I've been afraid of changin' 
'Cause I've built my life around you 


It could be the theme of the Republican party, whose warm embrace of all things Trumpian seems impossible to shake. As if there were any doubt. Trump secured the Iowa Republican caucus with a landslide 51%. Next up is New Hampshire where Haley is polling well. Trump though looks unstoppable.  


Elsewhere, Zelensky wants peace talks as the money runs out. Iran launched missile strikes in Syria and Iraq...fears of escalation not yet impacting oil prices which are steady after a couple of sessions in which Brent has traded in a 5% range.  


European stock markets drifted more decisively lower on Tuesday as hopes for a rate cut by the European Central Bank diminished following some hawkish comments from policymakers, whilst data confirmed German inflation rose in December. The DAX slipped about 0.7% to below 16,500, whilst the FTSE 100 fell about a third of a percent to below its 50-day SMA.  


Several monetary policy hawks from the European Central Bank circled, delivered a clear message in concert – this was no coincidence so the market is taking it seriously. Nagel said "It's too early to talk about cuts, inflation is too high,” whilst Holzmann told CNBC: “I cannot imagine that we’ll talk about cuts yet, because we should not talk about it. Everything we have seen in recent weeks points in the opposite direction, so I may even foresee no cut at all this year.” [emphasis my own]. I think this really goes to the point that I’ve been making for a while now – the market is pricing way too many cuts; CBs are going to look at lumpy, non-linear disinflation and not feel completely assured that they are in a position to cut. Labour market tightness provides the cover to stay higher for longer. 


Meanwhile German inflation was shown to have risen from 3.2% in November to 3.7% in December. UK wage growth slowed to 6.6% and both sterling and the euro slipped sharply against the US dollar as markets opened again on Tuesday as the 10yr Treasury yield jumped above 4% again after finishing last week down at 3.95%. Wall Street reopens today after a holiday.  


Wise shares fell – a beat but mainly on net interest income which is a little lumpy and less reliable. Guidance was raised by this is just a catch-up with the market consensus anyway. Good figures but well priced vs peers. Card Factory – shares also down despite a positive update that continues the string of upgrades. Full-year profit before tax at top end of range at £62m; basket values on the rise ...huge growth outlook that is probably not reflected by the reaction today nor the share price in general. 

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