- Positive mood in financial markets after the FOMC meeting & Dutch elections outcome. Global stocks increased across the board, while sovereign bond yields inched up. The major market-sensitive events were the following:
- As expected, the FOMC raised the Fed Funds rate by 25 bps to the 0.75%-1% range (see). With its outlook unchanged, it seems that the committee will adhere to its strategy of gradual normalization, which implies two additional rate increases this year, with the next rate hike occurring in June. The move defied predictions of a more aggressive set of rate-raising forecasts. As a result, market odds of four Fed rate increases in 2017 plummeted, dragging down the USD, UST yields and equity indices in yesterday’s session. Despite the Fed’s rate-hike, EM assets showed resilience, favoured by a weaker USD and yields.
- European stocks increased sharply, while the EUR held on to its sharp appreciation of yesterday against the USD (above the 1.07 threshold), as Dutch election results (see) provided some relief, with the populist Freedom Party gathering less support than expected (20 seats). Moreover, the prospects of a Le Pen victory in France weakened, on the back of a decrease in bets implying odds of a victory in the French presidential race.
- No significant news from other developed countries’ central banks. Despite the fact that the BoE (see) kept its monetary policy unchanged, the GBP appreciated significantly after one member caused surprise by voting for a rate hike and amid inflation concerns. On the other hand, the BoJ (see) also kept monetary policy on hold and gave no hint on future moves.
- The TRY jumped after the Turkish central bank raised the liquidity window rate by 75 bps, but kept the main policy rates on hold. On the other hand, the CNY appreciated slightly after the PBOC decided to raise interbank rates.
Update 18 CET 16 March, 2017
Source: Bloomberg, Datastream and Haver
* With one day delay
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