Daily Commentary BY THE CURVE TEAM –

Markets Left Wanting More Following Jackson Hole

28th of August, 2017

Friday’s central bank symposium offered little to the outlook for global monetary policy, contrary to the hope of markets. US Fed Chair Janet Yellen and ECB President Mario Draghi both spoke on regulations, with the latter choosing not to address some key developments in the Eurozone.

Whilst markets were looking for a bit of clarity around the outlook for US interest rates in Yellen’s speech at Friday’s meeting of central bankers, she instead took her time to defend the regulations put in place in the wake of the GFC. However, she did touch briefly on the recent uplift in the US economy, noting that “substantial progress has been made toward the Federal Reserve’s economic objectives of maximum employment and price stability.

A short time later we heard from Mario Draghi, and in similar fashion we were not given any insight into monetary policy expectations for the Eurozone. An important thing to take out was that he chose not to mention the recent appreciation of the Euro, which has appreciated over 12% for the year.

One of the key contributors to the recent strength of the Euro has been the ongoing strength of the German economy, which contributes around 30% of Eurozone GDP. This theme continued on Friday with IFO business conditions exceeding market expectations, echoing the comments made from Bundesbank President Jens Weidmann earlier in the week.

However, the ECB’s single mandate of managing inflation means that the near term outlook for interest rates for the Eurozone remains the same.

Relatively quiet week domestically on the data front as we lead into next week’s GDP figures. In contrast a number of key releases in the US with the highlight being Non-Farm Payrolls out on Friday, the FOMC will be watching carefully.

Oliver Parsons

Client Relationship Officer