Market Brief: world waits on Draghi
07 Sep 2017
We had two surprises in the world of central banking yesterday. Firstly, the Bank of Canada raised their interest rates to 1%, up 25 basis points from the previous level, against many economists’ expectations.
Today's data release | Key levels | |||
---|---|---|---|---|
12:45 | EU ECB policy announcements |
Support | Resistance | |
13:30 | EU ECB's Draghi press conference |
1.2850 | 1.3043 | |
13:30 | US initial jobless claims | 1.0830 | 1.1049 | |
17:15 | US Fed's Mester speaks |
Market overview
The Canadian dollar surged to its strongest level in two years, short-term bond yields hit a five year high and the country’s main stock index slipped. The BoC also left the door open to more hikes in 2017. It is the only major central bank besides the US Fed that has been raising rates recently. Secondly, Stanley Fischer, the vice chairman of the US Federal Reserve, submitted his resignation which adds to the turbulence there. The central bank is currently undergoing a raft of changes, including the possible exit of Chair Janet Yellen in February. Fischer has been an advocate of higher interest rates, so his loss on the committee could signal that there is less likelihood of a rate rise in the near future.
Also on the US front, the President surprised his Republican colleagues yesterday by striking a deal with the Democrats to undertake a short-term extension to the debt ceiling and to keep the government funded beyond the end of this fiscal year (end-Sept), through to mid-December. Assuming the proposal passes Congressional votes, both issues will therefore need to be looked at again in a couple of months’ time, if not before. The move to suddenly sign off on a temporary arrangement surprised Republican colleagues who had expected the President to drive a harder deal; the added bargaining power of tying Hurricane Harvey funding into the legislation meant key Republicans thought it was likely to be difficult for Democrats to oppose a more permanent uplift. The move by the President to sign off on a deal without bringing key Republican allies on-board highlights the void between Trump and key Republicans Mitch McConnell (Majority Leader of the Senate) and Paul Ryan (House Speaker), both of whom appeared to expect Trump to work towards a permanent deal. That void is yet another reminder of the uphill struggle likely to be faced in getting the President and Republicans to unite over issues like tax reform over the coming month.
Also on the US front, the President surprised his Republican colleagues yesterday by striking a deal with the Democrats to undertake a short-term extension to the debt ceiling and to keep the government funded beyond the end of this fiscal year (end-Sept), through to mid-December. Assuming the proposal passes Congressional votes, both issues will therefore need to be looked at again in a couple of months’ time, if not before. The move to suddenly sign off on a temporary arrangement surprised Republican colleagues who had expected the President to drive a harder deal; the added bargaining power of tying Hurricane Harvey funding into the legislation meant key Republicans thought it was likely to be difficult for Democrats to oppose a more permanent uplift. The move by the President to sign off on a deal without bringing key Republican allies on-board highlights the void between Trump and key Republicans Mitch McConnell (Majority Leader of the Senate) and Paul Ryan (House Speaker), both of whom appeared to expect Trump to work towards a permanent deal. That void is yet another reminder of the uphill struggle likely to be faced in getting the President and Republicans to unite over issues like tax reform over the coming month.