Market update: Trump’s Fed pick helps sentiment, Forint drops after dovish rate hike

27 Mar

by Mihály Tatár

 

Good Morning!

 

  • After Monday’s complete pause, on Tuesday stock markets tried their way higher (SPX +0.72% – right back to the 2810-ish key zone, Nasdaq +0.71%, DAX +0.61%, Shanghai +0.64%), led by energy shares (WTI 60, Brent 68.10 USD, Exxon +1.3%, Shell +1%, MSCI Energy +1.1%, on Russia repeating that the production cuts are going well and Venezuela with its ports still sitting in the dark after the power outage). The real boost, however, came from Trump’s Fed board pick, Stephen Moore, who recommended an immediate half a percentage point rate cut (!), and called December’s hike a mistake. (So much for patiently waiting out what will happen with the US economy. Note that even the consumer confidence index dropped yesterday to 124 – the lowest in a year, altough still at levels Eurozone countries would love to see. Since the German data disaster, the EURUSD quietly slipped back to 1.1250, not helping the historical revival of the US export economy, and making US decision-makers probably very angry.) Speaking of central banks, the Hungarian Central Bank (MNB) just executed a classic Western-style dovish rate hike. (This answers the dilemma discussed here earlier: If you have to do something about inflation, but see major central banks making U-turns towards monetary easing, and you don’t want a too strong Forint, what do you do?) The MNB raised the overnight depo rate by 10 basis points (to -0.05%), tweaked the swap program a bit and directed banks to increase Bubor rates by the same 10 basis points, but otherwise, went to on to declare that this step was a ’one-off’, doesn’t mean ’the start of tightening cycle’ and anyway will be ’sufficient’ to reach the CPI goal. Furthermore, it announced its 300 billion HUF corporate bond buying programme, – a strange timing by the way, to deliver it together with a hike – , with currency traders getting the not-so-subtle message and the Forint quickly weakened to 319.20 against the Euro.

 

  • While French President Macron received Chinese President Xi with an even more extravagant welcome than what he got from Rome (’the strategic competitor’ of the EU suddenly became ’an excellent partner’ for Macron, after announcing a purchase of 300 Airbus planes), in the latest EU embarassment, the UN wants to probe the ’horrific’ Mali attacks during which 160 were massacred in a single day in the West African country. (The EU promised several times to stabilize the region in the past 10 years, not the least to avoid a migration avalanche towards Europe, but the project went the way of the EU army, and now the EU is pleading with Canada to send in troops instead.)

 

 

Have a nice day,

Mihály

 

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