Casterrian Weekly Roundup

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On Wednesday, U.S. president Donald Trump was acquitted by the Senate, who voted largely along partisan lines.

In the U.K. last week, the Bank of England dropped productivity optimism and lowered expectations, and the National Institute of Economic and Social Research (NIESR), said that the government’s economic plan, which is focused on fiscal stimulus to revamp the UK’s infrastructure, will be stymied by the prevailing lack of spare capacity in the economy, which would risk driving up inflation and forcing higher interest rates.

Continue reading below to find your usual currency and market commentary and the latest headlines from around the business world.

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Currency and market commentary

Wall Street and European markets reached record highs on Thursday last week, despite ongoing concerns around the coronavirus.

Conversely, stock markets in Asia declined. The most affected sectors were those perceived as most exposed the efforts being taken to contain the spread of the virus.

China returns to work today after a protracted Lunar New Year period, but quarantine measures and travel restrictions continue to impact the economy as the country keeps up the battle against the outbreak.

Many economists are now expecting China will see flat quarterly growth in Q1, which will be the first time this has been seen since 2009.

Uncertainties about the virus and its economic impact are expected to keep markets on a volatile footing in the coming days and weeks.

In the U.K., the sterling finished the week broadly where it had started against the euro, though Brexit related concerns are likely to remain a bearish headwind on the U.K. currency.

In Asia, the Japanese yen rallied on Friday amid rekindling safe haven demand.

Ratings agency Moody’s suggested that while the coronavirus outbreak will weigh on discretionary consumer spending on transport, retail, tourism, and entertainment, that the Chinese government still has the financial means to absorb the shock.

On Friday in commodities:

  • Oil closed at $50.32 (-17.6% YTD)
  • Gold closed at $1,574.85 (+3.8% YTD)

Sources: Commodity prices – Markets Insider, Currencies – XE.

Ireland heads to the polls

Ireland held its general election on Saturday, the first general election held on a Saturday in the history of the State.

Taoiseach Leo Varadkar called the weekend election date, claiming it would help families and younger voters living or studying away from home to get to the ballot boxes.

The story however, which began to emerge as the weekend wore on, was that this was shaping up to be a historic election for its results more that its timing.

Exit polls showed an unprecedented surge in support for Sinn Féin, which looked likely to be reflected in seats as counting began on Sunday.

The question that throws up for the coming days and weeks is how this new parliamentary arithmetic can be equated into a government.

You can read further reports in the Irish Times here, or from RTÉ here.

Bank of England drops productivity optimism and lowers expectations

After years of over-optimism on UK productivity, the Bank of England threw in the towel on Thursday last week.

The central bank ditched the idea that Britain’s economy could sustainably grow at about 2.5 per cent a year, as governor Mark Carney believed when he took on the job in 2013. The BoE even stopped predicting the economy could grow at about 1.4 per cent a year, which it said in 2019.

The UK economy is in a difficult place, the BoE’s Monetary Policy Committee concluded, and that meant it could only grow at an annual rate of 1.1 per cent over the next three years without fuelling damaging inflationary pressure.

Bank of England says the economy has lower capacity for sustainable growth

And if growth exceeded 1.1 per cent, quite soon the BoE could feel compelled to raise interest rates to slow the economy and prevent it from overheating.

Against this backdrop, the BoE marked down its growth forecasts over the next three years without a large change in its inflation prediction.

Read the full repot from the Financial Times by clicking here.

Donald Trump becomes third U.S. president to be acquitted of impeachment

Trump’s acquittal was a moment that many in Washington talked about as the inevitable outcome of the impeachment process, once the evidence the House managers gathered hit the political realities in the GOP-controlled Senate.

But inside Trump’s inner circle, it wasn’t always clear that the President would be able to contain the drumbeat of negative headlines and keep Republicans on board for the long months from House Speaker Nancy Pelosi’s announcement of the inquiry on Sept. 24 to the President’s acquittal on February 5th.

In an article released on Thursday, Time Magazine in the U.S. published an article detailing how they believed Trump managed to secure his acquittal.

The full Time Magazine article can be viewed by clicking here.

Disclaimer: The Casterrian Weekly Roundup is a marketing communication and should not be used for any investment research. This document is a general communication being provided for informational purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products.