The World In A Week – The Greatest Showman?

29th July 2019

Headlines were dominated by the Conservative Party leadership contest, which saw the expected outcome of a victory for Boris Johnson. In his inaugural speech as Prime Minister, Johnson said his priorities were to deliver Brexit, unite the country and defeat Jeremy Corbyn.

With around 14 weeks in which to deliver Brexit, Johnson wasted no time in reshaping the Cabinet, culling 15 ministers in order to surround himself with a team that share his views. There will be a lot of hard worked required, for both the UK and EU, to find a resolution in just three months that could not be achieved over the past three years. Particularly when Parliament is only scheduled to be in session for around 21 days during this period and the EU already reiterating its hard stance.

When it comes to rhetoric, Mario Draghi has the crown amongst central bankers. The current head of the European Central Bank (ECB) signalled that he would be prepared to cut interest rates in order to tackle a slowdown in the eurozone economy. He said the risk of a recession was low, however the outlook is worsening, blaming the trinity of Brexit, trade wars and geopolitical uncertainty. His comments also marked the seventh anniversary of this infamous “I will do what it takes” speech, in which he pledged to keep the eurozone intact in the summer of 2012, the height of the sovereign crisis that was sweeping throughout Europe. These words were enough to see off the spectre of collapse and action did not have to follow for several years. However, the ECB’s greatest showman has his final curtain call, stepping down in October, but looking to leave a clear path for this successor.

The final showman is also a central banker. Jerome Powell, the chair of the Federal Reserve, meets with his fellow members of the Federal Open Market Committee on Tuesday and Wednesday. Having spent the previous week building expectations for a significant rate cut, last week saw this being walked back with the art of managing expectations being stretched beyond creditability. Prospects are for a 0.25% cut to US interest rates, given us some substance to the continuing and increasingly confusing rhetoric over the past seven months.

Politicians have always been showmen of a sort, but now we have the heads of the world’s most influential central banks joining them on the front burner. We expect to be inundated with forward guidance during the summer, but it is autumn that we need to see action with Brexit as well as the central bankers.