Market Review – Fundamental Perspective 22 September 2017

Asian equity markets have followed their US counterparts lower this morning after a threat by North Korea to send a hydrogen bomb into the Pacific weighed on risk sentiment.
USDJPY fell by as much as 0.7% driven by safe haven demand but the biggest move yesterday came in Indian assets after Bloomberg reports that the government is considering measures to boost growth, which would widen the fiscal deficit.
PM May’s Brexit speech in Florence, expected to take place around 14.00, will be in focus today and it be the first big Brexit-specific speech by the PM following the General Election back in June.
Barclays Research believes that “…the challenge for the PM in her speech will be to appear constructive to her EU partners, so as to advance the negotiation process, while at the same time not angering those within her own party, who may prefer a less accommodative course vis-à-vis the EU in the negotiations…”.
While some central banks have begun a normalization of interest rates, a majority remain in wait-and-see mode. Norges Bank kept its rhetoric and policy setting unchanged yesterday as did the SARB (South Africa) and the central bank of Taiwan.
German elections will be held this Sunday and polls currently show that another grand coalition is the most likely outcome, but an alternative outcome cannot be fully discounted.
For example, a large increase in the share of the anti-European AfD could reduce the leeway for further European integration.
New Zealand also heads to the polls on Sunday which should be close given that the gap between the ruling National Party and the opposition Labour Party has narrowed.
Recent price action suggests that a Labour victory could weigh heavily on NZD.

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