This week, traders focused on the following market events.
The game of chicken on Brexit continued this week. A week after parliament rejected the proposal by the prime minister, she tried to bring the bill back. She was hoping to win support from the DUP members. However, she suffered another blow from the speaker, who said that he will not accept another vote for a bill that does not have enough changes. In response, the premier went to Brussels to ask the members for a 3-month extension. Instead, what she got was a one-month extension. This is because EU leaders are concerned about the continued uncertainty if the issue continues to drag on. Therefore, traders will continue to watch out for this issue and see what will happen.
The Fed was also another big issue this month. This is because the central bank delivered its interest rates decision on Wednesday. In the decision, the bank left interest rates unchanged between 2.25% and 2.50%. This was expected. In addition, the bank said that it not likely to increase rates again this year, which brought relief to the market. In response, stocks rose, treasuries declined, and the dollar weakened. The Fed also said that it will begin reducing the pace of the balance sheet reduction from May this year. In the past, the market was concerned that the Fed was reducing the balance sheet very fast.
The Swiss National Bank (SNB) was another key central bank to announce its interest rates decision. The bank did that yesterday and left rates unchanged. This was an expected move. The bank also lowered its inflation expectations for the fourth meeting straight and said that the Swiss franc was overvalued. However, the challenge for the bank is that it does not have enough tools to devalue the currency because interest rates are already in the negative.
The Bank of England decided to leave rates unchanged in its meeting yesterday. The vote was unanimous with all members voting against a raise this month. This was expected because it would have disastrous for the bank to raise rates at a period of increased uncertainty about Brexit. In the statement, the bank said that rates are likely to remain unchanged until the Brexit vote happens. If the country leaves without a deal, it may raise the possibility of a rate cut.
This was a heavy week on economic data. On Monday, data from Japan showed that exports and imports had declined by a larger margin than earlier expected. On Tuesday, Australia released the central bank minutes of the past meeting, the UK released the employment numbers and EU released the ZEW surveys numbers. On Wednesday, the UK released the inflation data while the US released mortgage numbers. On Thursday, New Zealand released the GDP numbers, Australia released the employment numbers, UK released the retail sales data, while the US released the jobless claims, manufacturing data, and housing numbers. Today, focus will be on Japan’s inflation numbers, EU PMI numbers, Canada’s CPI numbers, and US PMI numbers.