Market Review – Fundamental Perspective 17 October 2017

Global equity markets largely continued to edge higher yesterday whilst US Treasury yields were modestly higher. The USD strengthened after reports that President Trump was impressed by John Taylor, one of the more hawkish candidates for the Fed Chair position, after the two met for an hour-long interview at the White house last week.
Trump is expected to meet with Yellen later this week, another candidate for the Fed Chair role, and Trump has said that he plans to make a final decision within the next few weeks.
The overnight USD strength has pushed EURUSD down to test short-term support around the 1.1770/60 area
In the UK, short-term GBP fluctuations continue to be driven by Brexit headlines and GBPUSD fell yesterday after May and Juncker failed to smooth over disagreements in yesterday’s statement.
However, focus is expected to shift to economic fundamentals today as we get UK CPI and Retail Price Index for September. Barclays Research expects CPI to come in at 3.0% y/y and “…any upward surprise could see a resumption of GBP strength as markets price in a steeper path of BoE rate hikes…”.
In Europe, politics is back in focus after the OVP (Conservatives) won the Austrian general election and a coalition with the far-right FPO seems likely. Meanwhile, Chancellor Merkel’s position was further weakened in Germany after CDU was defeated by SPD in regional elections in Lower Saxony.
NAFTA renegotiations continue to stall after the latest round of aggressive demands from the US. Mexican assets continued their recent underperformance and USDMXN rose to a 5 month high.

PCM Enterprise - Development Firms Review