The European Central Bank’s monetary policy decision on Thursday was the dominant market event last week. President Mario Draghi pushed any tapering decision to next month’s meeting, but insisted rate tightening would be a prolonged process. The Central Bank slightly lifted its economic outlook for the region while revising its inflation forecasts for 2018 and 2019 downward, leading to a Euro surge against the US dollar. The common currency broke through the key psychological mark of $1.2000.
The Bank of Canada was the other notable Central Bank in focus, with policymakers there surprising most investors with a 25 basis-point rate hike to 1.00%. In the US, the federal debt situation was back in the spotlight after President Trump and Congressional leaders struck a deal to extend the debt ceiling with funding legislation. On the data front, the trade deficit showed no signs of shrinking, keeping the US on track to record a wider gap in 2017 than in 2016. The deficit edged 0.30% higher to $43.70 billion in July from $43.50 billion in June. Across the Pacific, Chinese export growth slowed more than forecast to 5.50% in August as demand from most major trading partners softened. Imports witnessed an unexpected 13.30% gain, marking the tenth straight month of expansion.