Market movers today
Today’s main eventis the ECB meeting . Following the latesteCB meeting in early March, market participants have speculated about the sequencing of the ECB’s exit st rategy and some weeks ago, the market priced in a 10bp deposit rate hike from the ECB at the end of this year. Since then, the communication from prominenteCB members has signalled a more dovish stance and in the most recent speech from Mario Draghi he concluded ‘a reassessment of the current monetary policy stance is not warranted at this stage’ . We expect the ECB to send the same dovish message at the coming meeting, while we believe it will stick broadly to its currentint roductory statement without removing some of the soft wording.
Ahead of Draghi ‘s press conference at 14.30 CET, the German inflation figures are released.
In the US, core capital goods orders are released. Although the oil price has notincreased in 2017, manufacturing confidence is very high, indicating tail winds to core capital goods orders.
Selected market news
Asian equity markets are more or less unchanged this morning following the US administ ration announcement on its tax plans and the Bank of Japan meeting this morning. Regarding the US tax plans, there was no major news, as the Trump administ ration repeated thatit wants to both cutand simplify taxes for individuals (7 to 3 tax brackets) and corporates (15% corporate tax, one-off tax on dollars held overseas " homeland investmentact 2", territorial tax (did not use the words border adjustment tax) financed by removing most tax deductions and higher GDP growth (" 3% or higher"). We still believe Trumponomics will come later and be smaller than previously pledged and thata deal is unlikely to be reached until after Congress’s August recess. US equity markets finished flat while the USD weakened slight ly overnightagainst the EUR. Focus in US politics is now on avoiding a U.S. government shutdown, which requires a spending bill to be passed by both houses of the US Congress and signed by President Donald Trump by tomorrow at midnight .
This morning, the Bank of Japan (BoJ) keptits monetary policy measures unchanged as widely expected. No noteworthy reaction in USD/JPY afterwards suggesting that unchanged policy from the BoJ was widely expected. We still expect that the BoJ is likely to keep its policy unchanged for the rest of Koruda’s current term as governor, which ends in April 2018.
On trade related issues, the Trump administ ration agreed not to terminate NAFTA at this time and the leaders from Mexico, Canada and the US agreed to proceed swift ly, according to their required internal procedures, to enable the renegotiation of the NAFTA deal to the benefit of all three count ries according to a Bloomberg story ({NSN OP1TGZ6S972H }). The Mexican Peso, which has already st rengthened the most (9.25%) among emerging market currencies against the USD this year, gained another 1.4% this morning. Also the CAD st rengthened by 0.55%.
