Another judge ruled Donald Trump is still banned from imposing a travel ban, at least temporarily. The much-anticipated Dutch elections, being used as a further gauge to the rise in popularism, was a bit of a non-event in the end. The ruling party lost a third of their seats but will retain control.
On Wednesday, Federal Reserve duly announced the much anticipated 0.25% increase in the Fed funds rate. The accompanying comments were always going to be the swing factor on how the equity and bond markets reacted. Janet Yellen appeared to paint a picture of modest growth and a slow path to higher rates in the coming year. There were suggestions that she may talk not of three hikes this year, but possibly four. Her comments were considered more “dovish” than “hawkish”. Yields on the ten-year US treasury fell as bond prices rose, and the US dollar lost ground against the yen and other currencies. Stock markets cheered this goldilocks picture of modest interest rises accompanying economic growth.
The Federal Reserve were not the only central bank to raise interest rates last night as the PBOC increased the rates it charges in open market operations and on its medium-term lending facility. Analysts believe this move by the Peoples Bank of China will have a limited impact on the economy, but it is worth noting that the two largest economies in the world are tightening monetary policy in tandem.
Later on Thursday it was the Bank of England’s turn to announce that, in contrast to the US and China they will not be raising interest rates. However, there was one dissenter in the pack as the vote for keeping rates where the vote went from 9-0 to 8-1 in favour, with several others wavering, according to the minutes.
Unlike the Federal Reserve now, the Bank of England have limited fire power should the Brexit negotiations impact growth in the coming months. An improving global economy in the past year will have helped support the UK economy post the Brexit vote. This tail wind will be needed in the coming months to help underpin the UK economy once article 50 is triggered, and negotiations start in earnest.
Later today the Michigan consumer sentiment survey preliminary estimate for March is released. Consumer sentiment has dipped in the US as it has in the UK, in the past couple of months and a further dip later today may explain some of the dovish comments last night. It is also worth noting the global Purchasing Managers composite Indexes for March also declined for developed economies, having been steadily climbing from this time last year. However the readings do remain comfortably above 50, suggesting global economy continues to expand.