Market Review – Fundamental Perspective 26 October 2017

European and US equities were lower on the day yesterday and USD fell overnight versus G10 peers on speculation that Trump might give the relatively dovish Yellen another term as Fed Chair.
GBP was the clear outperformer in G10 space after a stronger than expected GDP print whilst CAD weakened as the BoC struck a cautious tone at its meeting.
South African and Turkish assets, including their respective currencies, were two of the key underperformers in EM space due to idiosyncratic stories.
In South Africa, the budget presented to Parliament yesterday showed a wider-than-expected deficit and it lacked a clear plan to close said deficit in the coming years.
In Turkey, reports that German institutions are restricting financing to Turkey weighed on sentiment. This follows a recent diplomatic spat with the US and unconfirmed reports of possible sanctions on Turkish banks over alleged violations of Iran sanctions.
UK Q3 17 preliminary GDP came in slightly higher than expected at 0.4% m/m thanks primarily to a rebound in business services and finance. Despite beating expectations by only a small margin, GBPUSD rallied around 1% as the print seemingly confirms that the BoE will hike next week.
Today’s focus lies on the ECB meeting where a change to the bank’s QE programme is expected
Barclays Research expects “…President Draghi to announce a nine-month extension of the asset purchase program at a slower pace of EUR30bn per month (current: EUR60bn)…”. Also, they think it is unlikely for the ECB to “…commit to tapering towards zero at the end of the extended program…” meaning that QE could continue at least until the end of 2018.

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