Market Review – Fundamental Perspective 20 December 2017

US equity markets closed marginally lower on the day yesterday and the S&P 500 reversed some of its recent gains dropping around 0.2%. In FX, Asian EM currencies gained against USD across the board, while NZD was a notable underperformer in G10 space dropping 0.9% from yesterday’s highs on the back of lower-than-expected November trade data.
The US Senate passed the US tax bill with a 51-48 majority last night and sent it on to the House of Representatives for a final vote today. The USD remains subdued ahead of this key event .
The Riksbank left its repo rate unchanged at -0.50% this morning as was widely expected and the bank reiterated its forecast for a first rate hike sometime in mid-2018.
The bank also announced that starting in January 2018, it will begin reinvestments of redemptions and coupon payments from its bond portfolio which will continue until the middle of 2019 at least
In the UK, the Bank of England could present plans today to allow European banks to offer financial services under existing rules after Brexit.
New Zealand’s Q3 GDP report is due this evening (Thursday local time) and expectations are for a moderation in growth to 2.4% y/y (prev. 2.5% y/y). Barclays Research expects a weaker-than-expected print to dampen the NZD but it maintains the view that further NZD weakness is limited and that concerns about the Labour-NZ First coalition are overdone.

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