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Market Round Up: Euro Zzzone 😴 – Turkey’s Money Helter Skelter 🎢

by | 14 Sep, 2018

 

1. Euro Zzzzzone

The European Central Bank (ECB) left its monetary policy entirely unchanged yesterday, leaving rates set at 0.4%. The main takeaway from the ECB’s press conference was that significant stimulus is still required by the Eurozone economy as inflation gradually moves towards the target set by Brussels. The statement “as long as necessary” made it clear that the ECB is still committed to an accommodative policy stance, even if it means its rates widen behind that of the U.S. Fed.

Meanwhile, its president, Mario Draghi, noted projections have been trimmed to 2.0% from 2.1% for this year and to 1.8% from 1.9% for 2019. The risks to the economic outlook were, however, assessed as ‘broadly balanced’. Newswires this morning are focussing on Draghi’s comments with respect to the output gap, with Draghi also saying that the Eurozone economy is expanding faster than it could manage – or that the controversially calculated “output gap” is closing a little – that’s the amount by which the actual output of an economy falls short of its potential output. This sets the stage for a slow withdrawal of stimulus – perhaps so slow to be hardly noticeable.

German Bund yields ended higher yesterday, presumably responding to the ECB’s cautious but optimistic outlook. However, supply blues hit the Italian bond market yesterday, with a very poor auction result putting the market on edge before the ECB’s statement. Some may have considered the bond auction was badly timed by the Italians!

Related:  What is the European Central Bank and why is it important?

 

 

2. Turkey’s Money Helter Skelter 

News yesterday was all about the Lira’s recovery following the country’s central bank decision to raise interest rates in direct contravention of President Recep Tayyip Erdogan’s demands.

The central bank decided to raise rates from 17.75% to 24%, surprising the market, and leaving Erdogan apoplectic with rage. The president had called for interest rates to be lowered only moments before the decision. If there’s any consolation to be drawn from this event it is that that the central bank is still independent of political influence – at least for now. The same could not be said of Turkey’s $50 billion sovereign wealth fund, where Erdogan appointed himself its new chairman.

As a sign of emerging market (EM) follow-me, follow-you dependencies, the South African rand, Mexico peso and Russian ruble showed support by also posting positive gains against the dollar.

Related: Market Round Up: Bondi Surf’s Up! & Turkey’s Lira Wobble

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
Brokerage services are provided by the following:
US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here.
India account traded securities are provided by SIC Stocks & Services PVT Ltd. SIC does not make any personal recommendations to buy, sell or otherwise deal in investments. Investors make their own investment decisions. The services and securities provided by SIC may not be suitable for all customers and, if you have any doubts, you should seek advice from an independent financial adviser. For more information and disclaimers, click here.

 

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