We take a look at the driving forces impacting on forex markets, equities, commodities and bonds this week. We consider the key calendar events and the key factors such as the Presidential election and the talks between OPEC and Non-OPEC countries in Algeria over oil production levels. The report also contains a technical analysis of key charts which help to give a broader outlook as to where markets are moving.
There has been a tendency for major banks to disappoint recently amid suggestions that they are running out of ideas. Starting with the ECB, there was an anticipation that Draghi would signal a preference to move towards more support and more quantitative easing. Draghi refused to budge, pointing the finger at the need for fiscal support to take on its share of the heavy lifting. The Bank of Japan has been unable to weaken the yen at all this year despite negative rates and now switching from controlling the monetary base to yield curve control in an attempt to try something different. But in effectively targeting 0% for the 10 year yield, the BoJ is admitting that inflation is a distant pipedream. The BoJ is running out of ideas and is accepting that it can do little to materially increase inflation expectations. The euro and the yen have respectively strengthened off in the wake of central bank decisions throughout 2016, precisely the opposite of what Draghi and Kuroda would have wanted. Then there is the Fed, which is trying hard to appear hawkish/positive/bullish about the economy but has once more shaved inflation and growth expectations, whilst significantly shallowing the pace of rate tightening. Just one 25 basis points increase is likely in 2016 (down from what could have been four) and as per the dot plots another two at best next year. Markets have been disappointed again. This must be the most dovish tightening cycle in history.