Market momentum was dominated by the decisions of central banks last week, starting with the Bank of Japan announcing no change in policy. The fireworks arrived when the Bank of England voted 7-2 to raise the base rate by 0.25% to 0.50% - its first hike since 2007. While the rate increase was anticipated, the dovishness of subsequent statements took investors by surprise, hammering the Pound as hopes of further tightening dwindled. The Federal Reserve also decided to stay put, instead focusing on the upbeat economy and fleeting effect of the hurricanes. The impact on markets was negligible as investors focused on who might replace Janet Yellen at the Central Bank’s helm.
Thursday, President Donald Trump nominated Jerome Powell as the next Federal Reserve Board Chair. If confirmed, Powell is anticipated to maintain policy continuity while rolling back some post-crisis banking reforms. In addition, the US tax reform package was presented to the House of Representatives, calling immediately for the corporate tax rate to be cut to 20.00% in a plan that also incorporates a one-time tax on profits repatriated by US multinationals. The October jobs report closed out the week with the US economy reporting a lower-than-forecast new 261,000 jobs last month. Apart from central banking announcements, preliminary GDP data from across the Atlantic indicated the Euro Area grew at an annualised 2.50% pace through the third quarter.
Central Banks Retain Centre-Stage
Weekly Report - 05/11/2017