Anchor resume from 1 to 8 of September 2017

Anchor resume from 1 to 8 of September 2017

Ana Martínez

Mario Draghi satisfied market expectations after announcing the maintenance of the reference rate unchanged at +0% and the deposit rate at -0,40%.

The meeting held by the members of the European Central Bank was undoubtedly the most followed reference throughout the week and one of the main engines of the market. As anticipated, no changes were announced in the current QE, however, the discussion was postponed until the next meeting on Thursday, 26th of October. It also meant that the door became opened to the possibility of keeping the current levels of bond purchases unchanged until the end of the year or beyond, linking this decision to the evolution of inflation and the Euro.

Another aspect that worried the most, has been the strength of the Euro, now trading at around 1,20 EUR/USD and registering a +14% in the year. Draghi stressed this issue by acknowledging that this could be a new source of uncertainty, but downplayed it by stating that few members were concerned about it.

In relation to growth forecasts, improved, standing at +2,2% for the current year from the previous +1,9%. Without changes in the CPI forecasts for 2017 (+1,5%), on the contrary, they reduced those of the next two years 2018 and 2019 to +1,2% and +1,5% respectively.

The market response has been in general positive, especially on the basis of the good data published; the GDP data  rose by a +2,3%, higher than the +2,1% forecasted.

In the United States, tensions with North Korea moved into the background during the last days, due to the devastating scenario that the Hurricane Harvey has left, and awaiting the arrival of Hurricane Irma (the strongest in the history), which has already caused significant damage in countries such as the Dominican Republic and Haiti.

Within this scenario, they continued to record capital outflows in US equity flows. However, the selectives maintained their maximum levels, supported by the good macroeconomic data published (improvements in non-agricultural productivity and indicators of activity maintaining expansive rates). Likewise, in the publication of the book Beige of the FED last Wednesday, the vision of robust growth is maintained, enhancing the improvement in private consumption, investment and the manufacturing sector, while as a negative aspect, special attention was focused on the absence of wage pressures in the labor market.

As for fixed income markets, it is worth mentioning the agreement reached by Donald Trump with the congressional Democrats in order to raise the debt ceiling that was expected to reach this month. The debt ceiling would be the debt limit issued by the US Congress and the main reason behind such agreement was the need to secure the necessary capital to take over the damages caused by the hurricanes.

In Asia we are waiting for the BOJ meeting next 20th of September, paying attention to the direction taken by the monetary policy applied by Kuroda. So far, the economy does not seem to follow strong gains, especially after posting a slowdown in the GDP rate, which stood at +0,6% during the second quarter of the year (below the +0,7% expected) penalized by lower consumer and business spending.

The Asian giant, on the other hand, registered falls in the growth of exports (to +6,9% below expectations), while increased its imports by +14%, deteriorating the trade balance to 41,99 USD Billions. In contrast, economic activity remains strong, as reflected by PMI levels (services now at 52,7 and the compound one at 52,4).

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