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FCP Daily Market Update

28 June 2017

 

Central bankers took stage yesterday with ECB President Draghi first to get the ball rolling. The euro reacted positively as he indicated a more neutral policy stance may be edging closer. Despite saying a considerable amount of stimulus is still needed and that inflation remains muted, German and French bond yields rose sharply and the euro soared as he noted above trend growth and a broadening recovery in the Eurozone.

Next up was Bank of England Governor Carney at a press conference following the Financial Stability Report. Brexit remains a major risk and rising consumer credit is clearly raising alarm bells as he announced a 0.5% increase in bank capital requirements with another 0.5% to come later in the year. Whether this is enough to satisfy the MPC hawks remains to be seen but in removing money from the banking sector it may temper their enthusiasm for a rate hike

The main players at the FOMC are hawkish enough to suggest another rate hike this year is still on the table but Janet Yellen failed to impress investors yesterday with her commitment only to gradual rate hikes. The dollar cause wasn’t helped as the IMF downgraded growth forecasts to 2.1% for both 2017 and 2018 from 2.3% and 2.5% previously.

Today’s releases from the States are unlikely to have a major market impact. The advance goods trade balance is the pick of the bunch with a slight narrowing in the deficit anticipated. Both wholesale inventories and pending home sales are expected to improve after declines last month.  

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