FX Commentary - October 23, 2017
Last week marked the 30th anniversary of Black Monday, October 19th, 1987, when stock markets around the world crashed and the Dow Jones Industrial Average and S&P 500 saw their largest one –day declines in history. Given current valuations across equity markets and years of quantitative easing by central banks superstitious investors couldn’t be blamed for keeping their fingers crossed through the week. Luckily, it seems the random walk guiding markets continues to keep avoiding all the ladders and windows as US stocks continued into record highs. In tandem, the dollar advanced against its peers and treasury yields rose as a budget resolution reached by the senate encouraged optimism on tax reforms.
On the data docket the US saw positive reports from regional manufacturing surveys and initial claims data—the latter of which hit a 4 decade low. Yet, in spite of the strong readings the main headlines driving last week’s action came out of Washington DC, where Senate Republicans passed a budget resolution marking the first step towards the long-anticipated tax overhauls and President Trump concluded a series of meetings with leading candidates to chair the Federal Reserve. Trump is speculated to make his final decision possibly as soon as this week, with the choice potentially disruptive to markets. Outside of the Fed chair race and continuing political developments, markets will see important updates this week on the US economy coming from Tuesday’s PMI’s, Wednesday’s Durable Goods Orders, and Friday’s GDP print. The impact of the hurricanes are expected to weaken GDP growth in the third quarter but various measures so far have shown resilience in spite of the disasters so there is room for upside on this reading which could encourage further dollar strength.
The euro traded largely within a range last week in spite of broad dollar strength and the unresolved dilemma in Spain. Last Thursday Catalan leader Carles Puigdemont failed to clarify his position on secession, forcing Spanish Prime Minister Mariano Rajoy to seek to temporarily suspend the region’s autonomy. Even as the crisis deepens markets have looked on as the European Central Bank is set to take center stage this Thursday. For the first time in years the central bank is expected to announce what will happen to its quantitative easing program going forward. Markets will be focusing on the amount of reductions in bond purchases as well as the timeline of the taper. Following the announcement ECB President Mario Draghi will be holding a press conference, and markets will be parsing his words carefully for any further indications of policy guidance.Prior to the ECB, the Bank of Canada releases its interest rate announcement and quarterly monetary policy report on Wednesday. The bank is expected to hold rates steady after hiking rates in its previous two meetings, but a recent downturn in data highlighted by last week’s miss on consumer spending and inflation has slightly obscured the future path of hikes. With recent hints of dovishness by Bank of Canada officials, markets will be paying close attention to Bank Governor Stephen Poloz’s language during his press conference as well as to the forecasts in the Bank’s Monetary Policy Report. Any indications of increased caution will weigh on the Canadian dollar as there are no other major economic releases for the country this week.
In the UK, Brexit difficulties continued weighing on the pound as no breakthrough has been made in the first phase of negotiations. Domestically, persistent inflation continues to outpace earnings growth, putting a squeeze on consumers as demonstrated by September’s weak retail sales figures. Such news certainly hasn’t boded well for the pound, enabling a vicious cycle of sorts as a weaker currency further spurs inflation. Moreover, with the current state of the consumer, the Bank of England will be hesitant to enact premature policy changes which could restrict credit and further throttle consumption. Aside from political developments, third quarter GDP released this Wednesday will be the main risk event for the pound.
In Japan, Prime Minister Shinzo Abe won a new mandate from voters as his coalition secured a convincing victory in parliamentary elections. The result pushed Japanese stocks to a record 15th straight day of gains as the yen declined. After suffering a drop in approval ratings stemming from corruption allegations, Abe now seeks to push forward many of his proposed reforms including his contentious constitutional revision. The stable political outlook in Japan suggests that markets will take a risk-on outlook for the country with significant shocks to dollar-yen coming from geo-political risks.
Sources: Bloomberg, Wall Street Journal, Reuters, Barclays, 4cast
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Our asset-based lending group recently upsized the credit facility (from $4MM to $7.5MM) for Yield Engineering Systems (YES). #assetbasedlending #bridgebank pic.twitter.com/QOHX5dNxrjOur Boston-based Technology Banking Group has extended a $5 million monthly recurring revenue (MRR) line of credit to One Medical Passport (1MP). To learn more details, read our press release: westernalliancebancorporation.com/bridge-bank-ho… - 1 week 5 days agoOur Life Sciences Group recently provided financing to @rejuvenatebio, an innovative gene therapy company developing treatments that reverse aging and address multiple age-related diseases in dogs and humans. pic.twitter.com/aOuNKenViHWe would like to wish everyone a happy and safe #IndependenceDay. In observance of the holiday, all Bridge Bank offices will be closed on Monday, July 5. pic.twitter.com/s7tEw12yRkReceive a free download of our report Markets to Watch: Chicago with data provided by PitchBook when you RSVP to attend our virtual event featuring a panel of experts breaking down the top-level trends that are defining the #VC ecosystem in #Chicago. info.bridgebank.com/markets-to-wat… - about 1 month 1 week ago pic.twitter.com/tyi91gSo0pOn June 22, our panel of experts will provide analysis and key insights into the #venturecapital ecosystem of #Chicago, which posted record $2.6 billion in value last year. RSVP now and receive a free download of our report with data provided by PitchBook. info.bridgebank.com/markets-to-wat… - about 1 month 2 weeks ago pic.twitter.com/pINVrAdeCMKey top-level trends that have defined #VC deal making in #Chicago are found in our free report Markets to Watch: Chicago. The report also contains analysis of exit activity, which our panel of experts will cover on June 22. RSVP now to receive your copy! info.bridgebank.com/markets-to-wat… - about 1 month 2 weeks ago pic.twitter.com/7OCO63IJ3iJoin us and PitchBook, along with our special guests to discover key top-level trends that have defined #VC deal-making in #Chicago. RSVP now and receive a free download of our report Markets to Watch: Chicago with data provided by PitchBook. info.bridgebank.com/markets-to-wat… - about 1 month 2 weeks ago pic.twitter.com/l0HaqoXNoGThe VC ecosystem in #Chicago generated record funding and exit activity during the pandemic. 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RSVP today and receive a free download of our report Markets to Watch: Chicago with data provided by PitchBook. info.bridgebank.com/markets-to-wat… - about 1 month 3 weeks ago pic.twitter.com/ATuhmDVuQLOur Technology Banking Group is proud to partner with Fluxx, the cloud platform used by world-class foundations and nonprofits to intelligently automate workflows, ensure compliance, improve operations and drive impact. pic.twitter.com/6wUsqMJnwyIn observance of Memorial Day, all Bridge Bank offices will be closed on Monday, May 31. pic.twitter.com/OPRe4C8wH6Join us and PitchBook, along with special guest Voyager Capital, tomorrow morning to discover key top-level trends that have defined VC deal-making in the Pacific Northwest. RSVP now to attend this virtual event. bit.ly/3odHXY4 - about 2 months 2 weeks ago #pnw #venturecapital #virtualevent pic.twitter.com/aJsyVW4XFiKey top-level trends that have defined VC deal-making in the Pacific Northwest over the past several years can be found in our recently released report, Markets to Watch: Pacific Northwest. Download it now to learn more. bit.ly/2R6cYkB - about 2 months 2 weeks ago #pnw #venturecapital pic.twitter.com/39v4LukI5zJoin us virtually for Markets to Watch: Pacific Northwest to discover how the PNW’s reputation for innovation has helped fresh capital flow into the VC ecosystem with commitments to new investment funds. RSVP today to attend and learn more. bit.ly/3odHXY4 - about 2 months 3 weeks ago pic.twitter.com/hoFdrqjYBcFunding for leading database software and cloudtech & DevOps segments bounced back in 2020, in the PNW, posting gains on deal count and aggregate deal value. 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Comprised of parents, educators and technologists, Securly is the first and only provider of enterprise security for K-12 schools since 2013. pic.twitter.com/OoRHNh5coQOur Boston-based Technology Banking Group recently provided a growth capital term loan to Examity, a technology company concentrating in the online proctoring market. Read our press release to learn more. bit.ly/3eWeu0g - about 3 months 1 day agoLearn how liquidity surges are fueling reinvestment into life sciences ecosystems by downloading a complimentary copy of our report Life Sciences Markets to Watch. The report also contains analysis of trends in valuations and financing sizes and their implications. pic.twitter.com/mWrsT22dBZFind out how CytoSorbents delivered technology to calm the storm during the COVID-19 pandemic. 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RSVP now to attend this virtual event. bit.ly/3dwyk2C - about 3 months 1 week ago pic.twitter.com/L2LpL5ooZuWith strong liquidity and rates of funding, it is likely that venture investment in the space will continue at a rapid pace. Download our complimentary report, Life Sciences Markets to Watch, to learn more and read the analysis. bit.ly/3gnq7Q9 - about 3 months 2 weeks ago pic.twitter.com/iH1LMoypkaOur #LifeSciences Group recently provided a term loan to Adarza Biosystems, developer of the ZIVA platform, a next-generation biomarker discovery and therapeutic research tool. pic.twitter.com/CR160SrQKbAustin’s VC ecosystem topped $2 billion in value for the third year running in 2020. 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RSVP by clicking this link bit.ly/3rzsUaZ - about 3 months 3 weeks ago pic.twitter.com/M3ithiqhjjOn April 14, our panel of experts will provide analysis and key insights into Austin’s VC ecosystem, which topped $2 billion in value for the third year running. RSVP now to attend this informative event. bit.ly/3rzsUaZ - about 3 months 4 weeks ago #Austin #venturecapital #technology #innovation pic.twitter.com/gzRc4qJELoAustin’s VC ecosystem topped $2 billion in value for the third year running in 2020. Download our report, Markets to Watch: Austin, TX, to learn more and read the analysis. bit.ly/3sGCwly - about 4 months 4 days ago #Austin #venturecapital pic.twitter.com/ltpq7r20P8Join us for Markets to Watch: Austin, TX to discover how the Austin VC ecosystem still secured a record $2.3 billion in aggregate value thanks in no small part to the its resilient enterprise tech sector. 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