Politicians are hiding behind financial markets to reach their goals and look for the guilty

What came first: the chicken or the egg? Fed’s monetary policy and Brexit vote in the British Parliament or the financial markets’ behaviour? In 2016-2015, Fed postponed a federal funds rate hike due to the correction of global stock indexes. At the end of 2018, FOMC’s representatives frighten investors by a US GDP slowdown that may be caused by the hysterical state of the developing markets.  However, we have to scare people around us from time to time. So that they don’t surround us to much. And hysterics is when you feel so bad that it starts feeling funny. 

While Donald Trump believes firmly that the reasons of S&P 500 retracement are hidden in Fed’s excessive involvement in normalization of the monetary policy, Theresa May warns the government that FTSE 100 and the British pound may collapse in case of disordered Brexit. According to the information from competent sources of Financial Times, not many ministers are satisfied with the EU agreement project, but most of them fear that the things can get worse. The British PM is trying to arrange the same trick with the Parliament.  Gentlemen, we learnt to make our dreams come true, but only the scariest ones so far...Shall we continue? Look at the reaction of GBP/USD to the referendum in 2016! Who wants to have a déjà vu?  Theresa May understands very well that speaking right in this case is better than thinking right, and intimidates the executive and legislative branches with the reaction of financial markets.  

Her opponents seem to stick to the principle “you’d better not argue with a woman”. The conservatives didn’t even manage to get 48 votes to file a no-confidence motion, the ministers that resigned because of Brexit are calling for a rebellion, but the stand-offish British Parliament isn’t so easy to shake up. The UK economy already reminds a lame horse, so it’s no point in attaching a cart to it. 

The situation around Fed doesn’t look less confusing. The central bank isn’t normally supposed to react to the president’s criticism and slow down normalization, but the latest comments of FOMC’s officials prove the contrary. Yes, they found various excuses, starting with trade wars and ending with hysterics in the developing markets and slack inflation dynamics, but trying to understand their logics will blow up your mind. Just the way it goes with the husband and the wife. We can only sympathize with Fed. Just like in nuclear physics, the scariest word here is “oops”. If you get carried away with raising rates, it will affect the economy; if you slow down the process, inflation will accelerate and you’ll get accused of being run by Donald Trump. 

So why not start looking for the guilty and alleging financial markets, finally? Let investors sell their stock based on the principle “the shorter the skirt is, the more we want it to be even shorter”.  As for the Central bank, it will simply wash its hands of the affair. And then it will react to “Can you stop lying for a while?” like “Well, I can keep silent”. 

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Price chart of GBPUSD in real time mode

Markets: let’s eat grandma?

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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