Weekly Review March 27
US political trends dominated during the week as President Trump was unable to gain approval for his Healthcare plans in the House of Representatives. The failure created a wave of speculation surrounding the Administration’s next moves and how seriously Trump has been damaged.
The US economic data releases had little overall impact with a slightly weaker than expected release for existing home sales offset by a stronger new sales release.
Unemployment claims were higher than expected at 261,000 for the latest week, but still suggested a firm labour market.
San Francisco Fed President Williams stated that three or four rate increases would be realistic for 2017 as a whole and Chicago head Evans also stated that a total of four hikes were possible, although this would depend on fiscal-policy developments.
Economic events were overshadowed by political developments with concerns that President Trump and the House of Representative leadership was having difficulties in gaining sufficient support to pass the Healthcare Act.
After intense lobbying, Trump eventually pulled the legislation on Friday as the House did not have the votes.
The dollar overall weakened during the week as US yields declined, but gained some respite after the White House suggested there would be a focus now on tax proposals.
The UK inflation data was stronger than expected with the headline annual CPI rate increasing to 2.3% for February from 1.8% the previous month and the strongest reading since September 2012.
The retail sales data was also stronger than expected with a 1.4% increase in sales volumes for February following to successive monthly declines.
The data increased speculation that the Bank of England would move closer to raising interest rates and Monetary Policy Committee (MPC) member Broadbent stated that it was possible that there would need to be a rate increase, although fellow member Vlieghe was more cautious.
Sterling overall was supported by the economic data and there was little sustained impact from the attack on the Houses of Parliament with only a lone attacker involved. The UK strengthened to 1.2500 against the dollar with the Euro finding support near 0.8600 against the UK currency.
The Euro-zone PMI data was stronger than expected with an overall reading at the highest level for close to six years with notable improvement in the French data.
The data increased optimism surrounding the growth outlook, although there were no major comments from ECB officials during the week.
Centrist Macron was seen to have performed well in the first French TV Presidential election debate as markets considered a victory for National Front leader Le Pen was slightly less likely.
The Euro overall made headway during the week with a test of resistance above 1.0800 in EUR/USD.
The Reserve Bank of New Zealand maintained interest rates at 1.75% following its latest policy meeting and also maintained a neutral stance on future policy.
Oil prices maintained a fragile tone during the week with a test of the lowest level for four months before a slightly rebound as Brent found support below $50.00 p/b.
Equity markets fell sharply on Tuesday, although there was a recovery over the remainder of the week.
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