Global equity markets ended weaker last week, after the US President, Donald Trump, announced that he would impose new tariffs on steel and aluminum imports to the US, sparking fears of a potential global trade war. UK markets ended in negative territory during the week, following downbeat corporate results. Moreover, UK’s Markit manufacturing PMI dropped to an eight month low in February, hit by the twin headwinds of Brexit uncertainty and a stronger Pound. Additionally, UK’s GfK consumer confidence declined in February. In contrast, British mortgage approvals rose more than market forecast in January, notching its highest level in six months. European markets ended the week on a negative footing, pulled down by losses in consumer goods and telecommunications sector stocks. Additionally, the Euro-zone inflation slowed to a 14-month low in February, underlining the European Central Bank’s (ECB) caution in removing stimulus. Also, German GfK consumer confidence dropped more than anticipated in March. On the other hand, the Euro-zone’s final Markit manufacturing PMI surprisingly advanced in February. Meanwhile, the US markets ended weaker last week. The US Federal Reserve (Fed) Chairman, Jerome Powell, stated that he would stick with a plan to gradually raise interest rates, as recent data has strengthened prospects of higher inflation. On the macro front, US new home sales unexpectedly fell in January, reaching its lowest level in five months, while the nation’s durable goods orders fell more than anticipated in January, marking its lowest level in six months. On the contrary, the US economy advanced as expected on a quarterly basis in 4Q17. Meanwhile, the nation’s consumer confidence rose more-than-anticipated in February, notching its highest level since 2000 and the nation’s ISM manufacturing index surprisingly advanced in February, marking its highest level since May 2004. Asian markets ended the week in the red, tracking losses in their US counterparts and as China’s manufacturing PMI dropped more than expected in February, reaching its lowest level in nineteen months.


Currency Update


The EUR ended firmer against the USD, after final reading of the Euro-zone’s manufacturing PMI unexpectedly advanced in February. The British Pound ended weaker against the greenback, after the EU Brexit draft fallout. The US Dollar ended mostly higher against its major counterparts last week, following the new Fed Chief, Jerome Powell’s comments on inflation, fiscal policy and growth, thereby boosting prospects of a gradual interest rate hike in 2018.



Fed's Powell: Gradual US Fed rate hikes amid
strong US growth outlook


The new Fed Chairman, Jerome Powell, in a testimony before Congress, noted that the US economic outlook had strengthened in the past few months, citing the passage of a $1.5 trillion tax cut plan and stronger economic fundamentals. Further, he pledged to “strike a balance” between the risk of an overheating economy while sticking with a plan of gradual interest rates hikes, as recent data has strengthened prospects of a rise in inflation. Commenting on the latest stock market rout, Powell stated that these developments would not weigh heavily on the US economy.



The Week Ahead


Going ahead, this week appears to be quite crucial, as several key monetary policy meetings are scheduled to be held. Policymakers at the Bank of Canada, the ECB and the Bank of Japan will convene this week. In addition to this, the Fed’s Beige Book survey, the Eurozone services PMI along with Japan & Australia’s GDP will be on investors radar.



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