By Michael O’Neil
“Why is it always the innocents who suffer most, when you high lords play your game of thrones?” Lord Varys asked this question in author George R. R. Martin’s book, Game of Thrones.
The 2017 version of the quote is “Why is it always financial markets who suffer most when President Trump plays his Game of Fed chairs?”.
The “who will replace Janet?” debate is raging. President Trump has promised a decision by November 3, before his Asia trip.
It seems that after every potential candidate’s interview, they become the favoured candidate. It happened with Jerome Powell, Kevin Warsh and most recently, John Taylor. Janet Yellen, the current Fed chair is supposedly being interviewed by the president on October 19. She has one attribute that all the others lack; she has the experience.
For the past two weeks, FX markets have ebbed and flowed in tune with the Fed front-runner du jour, and that will continue to be the case until President Trump makes his pick.
Another Game of Thrones is being played out in Spain. On Oct 1, the Catalonia region voted 90% in favour of independence. Naturally, the government in Madrid was irate. No politician wants to be interrupted when he or she is dining at the public trough.
Spain’s Prime Minister is set to suspend Catalonia’s autonomy on October 21, invoking article 155 of its constitution. The Catalonia leader, Carles Puigdemont has countered with a threat to unilaterally declare independence on the same date, if Madrid doesn’t agree to a dialogue.
Things could get ugly in a hurry. On October 12, Human Right Watch accused Spanish Police of using excessive force when they unsuccessfully tried to stop the referendum from taking place. Imagine the reaction, if the region declares independence?
“Will history repeat?” Source : Google images
Spain is a member of the European Union and its fourth-largest economy, but European leaders are strangely quiet on the subject. Perhaps, they don’t want their citizens to get any ideas. See no evil, hear no evil, speak no evil.
They aren’t the only ones. EURUSD traders are more focused on next week’s European Central Bank (ECB) policy meeting then they are on political strife in their back yard.
The prevailing wisdom is that the ECB will delay tapering decisions until the December meeting. Some traders are questioning that belief, thanks to a couple of ECB officials advocating tapering asset purchases.
On October 19, ECB Governing council member Ewald Nowotny said that the ECB could start normalizing policy before inflation reaches its 2% targets, saying it would be a mistake and problematic to wait too long. The day before, his colleague Francois Villeroy called for tapering.
Traders reacted by buying EURUSD, which is en-route to the half-way mark of the September-October range, just in case.
The Cersei Lannister and Daenerys Targaryen feud isn’t a whole lot different than Theresa May and Jean-Claude Juncker’s Brexit debate.
UK Prime Minister May would like a “soft” Brexit. She would like to leave the European Union slowly while negotiating bi-lateral trade agreements. Mr Juncker say’s “show me the money!” He wants somewhere in the neighbourhood of €58 billion. Ms May has apparently countered with a £20 offer, which was laughed at.
The EU says that they will not negotiate with the UK until the divorce bill is settled. Unless one of them has a couple of dragons to give the other an incentive to settle, a “hard” Brexit is looming.
The Game of Thrones is even more evident in North America. The King of the North (Canada) and the King of Mountain and Vale (Mexico) are in open revolt over what is viewed as unacceptable demands by The King of the Rock (USA)
Unfortunately for Canada, Justin Trudeau is more Robin Arryn, the Lord of the Eyrie, than Jon Snow, King of the North.
Canada’s Prime Minister likes to believe that he and Donald Trump are great friends, just because Trump said so. Last February, the President assured his Canadian pal Justin, that “America is deeply fortunate to have a neighbour like Canada. We have a very outstanding trade relationship with Canada. We’ll be tweaking it; we’ll be doing certain things that are going to benefit both of our countries.”
In the past few days, the US demanded 50% American content in all automobiles, an end to dairy and other supply management protections and a change to the dispute settlement mechanism. The benefits all accrue to America.
Canadians are thanking their lucky stars that Justin and Donald are such good friends. Imagine what would happen to NAFTA if Mr Trump was not satisfied with tweaks.
In 1889, Irish author and playwright, Oscar Wilde wrote: “Life imitates art.” If “Game of Thrones” is art, life in October 2017, proves the accuracy of his observation.
“Oscar Wilde, Fortune-teller?” Source: Wikipedia
