Macro Events & News

FX News

European Outlook: Asian stock markets moved higher, led by the Hang Seng which surged 1.56%. The Nikkei closed with a 0.7% gain as the Yen strengthened and the ASX was 0.20% better off at the close. Oil prices continued to rise and the front end WTI future is trading above USD 49 per barrel. Markets were relieved that the Fed delivered the expected 25bp hike, but didn’t signal faster tightening ahead and stuck with the projected 2 additional moves this year. The decision was followed by China’s central bank, which lifted charges on open market operations and the medium-term lending facility. The bank suggested that the move was largely driven by market expectations. European and U.S. stock futures are also moving higher and in Europe, news that in the Netherlands PM Rutte beat anti-EU populist Wilders by a surprisingly large margin will help to dampen EU and EMU break up fears as the focus turns to the French election and Brexit talks. Today’s calendar has central bank decisions from the BoE, the SNB and Norges Bank, with all banks expected to keep policy on hold. The Eurozone also has the final CPI reading for February.

FOMC: The FOMC hiked its target corridor by another quarter point, after a hiatus in February, for the third move of the cycle and the first of potentially three hikes forecast for 2017. Yellen and company had ensured that the move was nearly fully discounted in advance, and the positive market reaction suggested that they succeeded. The Fed’s stance wasn’t as hawkish as some had feared, but there were some subtle changes that merit closer inspection. The Fed has noted a more optimistic shift in sentiment in recent months, which is “obvious and notable.” But most businesses are still displaying a wait and see posture currently. Regarding a question on why raise rates now, given the Atlanta Fed’s Q1 GDP forecast was trimmed to a low 0.9%, Yellen noted policy is still accommodative and there are other signs the Fed is monitoring that are showing improvement. Yellen’s press conference has ended without any new insights or revelations. She outlined the Fed’s motives behind the actions, saying the tightening was appropriate given the improvement in the economy and as they are close to meeting their policy objectives. She again noted, as she has done in recent prior comments, that the Fed has yet to officially plug in projections on fiscal policy. There was no indication of any urgency behind further rate hikes.

Netherland: Anti-EU Populists take a hit. The latest polls ahead of the election already indicated that Rutte’s clear stance against Turkey’s attempt to bring the campaign for Erdogan’s constitutional referendum to the Netherlands helped the PM to overtake anti-EU populist Wilders, but the preliminary results of the Dutch election show Rutte winning with a surprisingly large margin. Nexit is off the table and the anti-EU camp has taken a hit, as the Dutch election also showed that while many are tempted to cast a protest vote and shake up the establishment, they do not want radical change and a breakup of the EU. So rather than acting as a positive example, the Brexit referendum seems to have acted as a warning. Rutte now will have to find coalition partners and the Netherlands could again face a lengthy period of political uncertainty as talks progress, but with Wilders beaten, this is unlikely to have wider market implications.

Japan: Earlier today during BoJ’s Policy Rate’s released and BoJ’s Press Conference, BoJ’s Kuroda said the bank will continue “powerful monetary easing” under yield curve control framework “to achieve the price target at the earliest date possible.” He noted that inflation has been moving sideways while saying that “momentum for inflation to accelerate to 2 percent remains in place but lacks strength.” Regarding the Fed’s rate tightening path Kuroda said “I don’t think U.S. interest rate developments will immediately have a severe impact on emerging economies,” adding that “we need to watch developments carefully.” He also touched on the trade protectionist issue, arguing that “not only the G20 but the IMF and OECD have also said that trade protectionism damages global growth,” emphasizing that “Japan’s stance on this will not change.”

Main Macro Events Today

  • BOE Statement & Rate Decision – The March BoE Monetary Policy Committee meeting (announcement and minutes), is widely expected to leave the repo rate at 0.25% and QE settings unchanged, both by unanimous vote.
  • EU Final CPI & core CPI – Eurozone will have the final CPI reading for February, which expected to remain unchanged at 2.0%. This is in line with the ECB’s upper limit for price stability. But, the uptick is mainly driven by oil prices and base effects, and with core inflation still low at just 0.9% y/y, the data is not sufficient to prompt a radical change in ECB policy.
  • US Philly Fed survey & Housing Starts – Philly Fed manufacturing surveys are likely to show a slower pace of expansion than seen in February at 30.2 from 43.3 last time. February housing starts are seen bouncing to a 1.26 mln pace after slipping 2.6% to 1.246 mln in January.

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Andria Pichidi

Market Analyst


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