Daily Commentary BY THE CURVE TEAM –

Trump Bluster Overshadows Key Developments

US politics stole the headlines once again overnight with more brash comments coming from the US President. This took the focus off more strong data out of the Eurozone, coupled with some conflicting comments on monetary policy.

Overnight we saw another animated performance from US President Trump, looking to shift focus away from recent events. Speaking in Phoenix, Trump was quick to cast doubt over yesterday’s lift in confidence around the prospect of tax reform and debt ceiling resolution, announcing that he would shut down the government by not extending the debt ceiling, if congress would not pay for his border wall. He also added he would potentially end the North American Free Trade Agreement as well.

In reality, it is Congress and the rest of the policy makers that control the debate of the debt ceiling. Furthermore they appear to be getting on with the job of policy making and not getting caught up in the political maelstrom, seemingly pushing forward with fiscal reform on their own.

All this overshadowed developments in Europe overnight. Of particular note was the German manufacturing PMI which printed 59.4 after it was expected to decline.

Meanwhile on monetary policy, Bundesbank President and ECB member Jens Weidmann was quick to comment on the Euro bond purchasing programme , announcing that “Based on our June forecast, there is no need in my view for taking further action for next year and in particular not for extending the buying programme”.

His view stands out in stark contrast to ECB president Mario Draghi, who was out defending the quantitative easing policy of the ECB in his final speech in Germany before leaving for Jackson Hole. These contrasting views indicate that there is still some way to go for the rest of the Eurozone to catch up with the likes of Germany.

The market is holding out for tomorrow’s central bank symposium in Jackson Hole, where speeches from Janet Yellen and Mario Draghi will be the key for the outlook for global interest rates.

Oliver Parsons

Client Relationship Officer