“3 Main Events” you should know – which happened last week in financial markets

October 31, 2017

3 big events happened last week: Australian Inflation, ECB announcement and Interest Rate in Canada.

“3 Main Events” you should know – which happened last week in financial markets

This article is originally referred from Orbex Market Recap

The markets were focused on the Bank of Canada and the European Central Bank’s monetary policy meetings.

The BoC held interest rates steady as BoC’s Poloz gave a dovish guidance.

Interest rates are expected to remain steady in Canada due to uncertainties from NAFTA and inflation.

The ECB matched market expectations, cutting its asset purchases to 30 billion euro a month starting January 2018.

The main interest rates were however left unchanged. The euro fell following the ECB’s decisions which was seen by many to be a dovish tapering.

Australia quarterly inflation rises 0.6%

The latest consumer price index data from Australia, released by the Australian Bureau of Statistics showed that inflation was up 0.6% on a quarterly basis in the third quarter of 2017.

This was below expectations of a 0.8% increase that was forecast but better than the 0.2% increase seen in the second quarter.

Australia Annual Inflation Rate: 1.8%, Q3 2017. Source: Tradingeconomics

On a year over year basis, Australia’s inflation rate advanced 1.8%.

This was a unchanged print from the second quarter and was below forecasts of a 2.0% increase.

The ABS chief economists Bruce Hockman said that the main reason prices increased was due to higher utility prices in the month of September.

The biggest gains were attributed to the rise in electricity and gas prices while wholesale prices also contributed to the upside.

Electricity prices were seen rising 8.9% on the quarter followed by other tradables that included tobacco, international holiday travel and accomodation and new dwelling purchases.

To the downside, vegetable prices, automotive fuel and telecommunication equipment prices were lower.

The RBA’s median CPI was seen rising 0.3% on the quarter. But this was below expectations of a 0.5% increase and marked an unchanged print from the second quarter.

The median CPI was seen rising 1.9% on the year but was slightly below forecasts of a 2.0% increase.

Consumer prices in Australia have now posted a decline for the past three quarters.

This comes as the annual inflation rate peaked to 2.1% in the first quarter and followed by two consecutive declines in the next quarters thereafter.

Bank of Canada keeps interest rates unchanged

The Bank of Canada, in a widely expected move held the overnight rate steady at 1.0%.

This comes after the central bank hiked interest rates twice in the past months of July and September.

The central bank was seen not being in a rush to hike interest rates as the central bank said that the uncertainties were mounting, citing inflation and NAFTA.

The Bank of Canada president, Stephen Poloz said that the Canadian economy will however need less monetary stimulus going forward.

However, he did not comment on the specifics on the timing of the next rate hike.

Economists are hopeful that the BoC will hike interest rates later in December. But the probability for the December rate hike was also down from 80% to 34%.

Last week, inflation data from Canada showed a moderate increase in consumer prices.

However, retail sales data showed a weaker pace of increase.

Higher gasoline prices were seen adding to the annual inflation rate which stood at 1.6%, slightly higher from 1.4% previously.

Excluding gas prices, the core consumer price index was up 1.1%.

Despite the increase, other measures of inflation was seen to be muted which further clouded the outlook on consumer prices.

ECB announces 30 billion euro tapering

The European Central Bank’s monetary policy meeting held last week showed that the central bank kept the main interest rates unchanged.

This included the main refinance rate, deposit rate and the marginal lending rate.

Rates across the board have now remained unchanged for thirteen consecutive months.

However, as widely expected, the ECB said that it will trim its asset purchases to 30 billion euro a month starting January 2018.

This new tapering is expected to last for nine months.

“Purchases under the asset purchase programme (APP) will continue at the current monthly pace of EUR 60 billion until the end of December 2017,” the bank said, reiterating its previous stand that the current pace of bond purchases will continue.

The central bank also said that if the outlook became less favorable, it will continue to adjust and even increase the bond purchases if the economic situation warrants.

Original Source: Orbex Market Recap

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