This week, traders focused on the
following market events.
Brexit
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.
Fed
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.
SNB
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.
BOE
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.
Economic Data
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.
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