Overview
Investors became nervous midweek after the US Fed’s March meeting minutes added vagueness regarding the direction of the next move in rates. Participants noted that the rate could shift up or down depending on upcoming economic data and other developments. US Core CPI printed a shade lighter than predicted at 0.1% from 0.2% expected putting pressure on the greenback. Earlier the IMF said the global economy was slowing and downgraded the global outlook for growth from 3.6% to 3.3% for 2019. Projections were positive growth prospects would improve in the second half of the year supported by shifts to central banks monetary policy
The EU have agreed to a Brexit extension to 31 October 2019 (6 months) as Theresa May continues to work on her 585 page withdraw agreement and a political declaration on the future of the UK. May will have extra pressure put on her between now and the exit date to stand down to allow a new party leader to enter the fray- I’m not sure this is the best solution with limited resources available. The main issue with an extension is until now government have been unable to agree on a way forward and make compromises. Fundamental disagreements between parties around what the relationship looks like between the EU and the UK have the capacity to derail yet a negotiated solution.
Here are the stats from Goldman Sachs:-
-No deal Brexit 10%
-Modified Brexit deal 50%
-No Brexit 40%- (that’s no exit at all)
The ECB left their main rate unchanged as expected at 0.0% saying current levels will remain unchanged through to the end of 2019. The ECB has pledged to continue reinvesting its bond in its massive bond buying program for an extended period of time. To support growth and liquidity the ECB released a fresh bout of stimulus on March the 7th rolling out a new cheap loans for banks – TLTRO’s (Target longer Term Refinancing Operations). The details of the new product will be communicated in the next meeting based on how economic data releases to decide on the terms of how the product would work. To summarise Draghi’s remarks – Incoming economic data confirms slow growth momentum, particularly in manufacturing in the Eurozone.
The RBA’s deputy governor Debelle confirmed they are in no hurry to start easing rates. Those in the camp of cutting rates will have to wait a while longer for such discussions with Debelle saying there is no actual expectation yet that cutting rates is needed. Debelle made direct reference to first quarter inflation which releases in two weeks on the 24th of this month. The Aussie Dollar crept higher across the board after the Debells’s talk. Federal government elections have been confirmed as the 18th May 2019.