As we reach the mid-point for the year, leaving behind a half most would rather forget and looking forward to a half in which central bank quantitive tightening is about to really pick up, Deutsche Bank’s Jim Reid writes that markets spent most of the month of June flip-flopping between constantly evolving trade-war related headlines, as well as digesting the diverging path of a more hawkish than expected Fed versus a more dovish than expected ECB following their respective policy meetings. Learn more
Just over a month ago, the UK was still reeling from the shock result of the general election and it would be another fortnight before Theresa May and the DUP finally hammered out a deal.
Barely had the ink dried on the DUP agreement when the European Central Bank Forum kicked off in Sintra, Portugal, and Mario Draghi, President of the ECB, unwittingly set the cat amongst the pigeons when he said that “deflationary forces have been replaced by reflationary ones”. This caused alarm when investors interpreted his positive tone as a precursor to the central bank slowing its economic stimulus package more quickly than markets were discounting. ECB officials were quick to voice concern that the comments had been misjudged but this didn’t stop sharp price action in rate and FX markets.
Alex Harvey (CFA) of Momentum Global Investment Management, one of our UK regulated, discretionary fund managers, shares his view. Click here to view.
• Sterling vs USD lowest since 1985, whilst UK equities reach record highs
• US economy adds 156,000 jobs in September
• Dollar rises as expectations converge on December rate hike
• ECB rumours trigger rise in global bond yields
• In commodities, oil rises and gold falls
News this past week
- ECB keep monetary policy on hold
- Fed Governor makes case for rate rise despite poor US data
- Global financial assets sell-off late in the week
- UK services sector strong, whilst trade deficit decreases
- Chinese trade data encouraging
One of the recurring concerns voiced by Bank of America’s Michael Hartnett is that with May now in the rearview mirror, we are entering “the event risk month” of June. Now it is UBS’ turn to reiterate the warning that June may see a spike in volatility due to “an unusual number of known unknowns.”
Spiegel Online International reports: Business and political leaders in Germany are increasingly frustrated with the monetary policies of European Central Bank head Mario Draghi. Recently, the confrontation has threatened to become damaging to the euro zone.
The alienation between Germany and the ECB has reached a new level. Back in deutsche mark times, Europeans often joked that the Germans “may not believe in God, but they believe in the Bundesbank,” as Germany’s central bank is called. Today, though, when it comes to relations between the ECB and the German population, people are more likely to speak of “parallel universes.”
The euro zone will need “a strong effort” from all its policymakers if it is to overcome the “significant challenges” that global markets have thrown down over the past few weeks, Mario Draghi the head of the European Central Bank (ECB) told the region’s lawmakers Monday.
Draghi set a dovish tone when he addressed European lawmakers. In his opening remarks he confirmed the ECB “will not hesitate to act” if there were downward risks to price stability from low commodity prices and/or transmission issues.