ECB helps drive euro lower

Stocks have failed to maintain their recent ascendancy, with European and US indices under pressure in the wake of yesterday’s FOMC minutes. Meanwhile, the ECB appears to be willing to cite euro strength as an issue, driving weakness across the board.

• Stock resurgence stumbles in wake of FOMC minutes
• Wall Street under pressure as Trump dissolves committees
• ECB minutes drive euro weakness

European and US indices have seen early losses amplified, in a move which seemingly had its roots in what was widely perceived as a dovish set of comments from the Fed yesterday. Unsurprisingly we have seen financials fall back across the board, as the prospect of higher rates in 2017 continues to diminish. Fears over the weakening inflation picture has put the December rate hike on a knife edge, with the balance sheet normalisation seeming the more likely of the two.

The dissolution of two business committees by Donald Trump is indicative of the fact that we are seeing the corporate world turning their back on the President in response to Charlottesville. Coming into power on a pro-business ticket where he promised to bring everyone together, we have seen zero pro-business policies implemented, and social divides widen. With fellow Republicans and now business leaders turning their back on the President, it feels as if the chances of true growth friendly reforms are looking less and less likely.

ECB minutes have helped accentuate recent euro losses, with the committee citing the appreciation of the euro as a major concern in relation to the impact of strengthening exchange rate in the event of a rate rise. Ultimately, with Draghi having talked down the euro for so many years, it is inevitable that markets will see value in the euro considering the economic resurgence that appears to be underway. For now, recent disinflation could calm the pressure on the ECB to act, yet it seems just a matter of time until we see rates, and thus the euro, rise once more.