Next FED Chair: Is it Powell, Taylor or Yellen?

Daily Update - 25th October 2017

Yesterday’s Market

• EUR Markit PMI Composite, Markit Services PMI & Markit Manufacturing PMI
• USD Markit Manufacturing PMI & Markit Services PMI

Yesterday Explained

For the second day in a row US Politics dominated the investor focus along with positive data from both manufacturing and services sectors in USA. President Trump visited Senate Republicans for lunch on Tuesday, and predictably traders took note of the market whispers surrounding Tax Reform and the next Fed Chair.

Out of the 3 shortlisted candidates, Stanford University professor John Taylor appeared more likely to be the next Fed Chair where a current Fed Governor Jerome H. Powell and Current Fed Chair Yellen is also on the run for the Chair. US 10-year yields popped higher on the Taylor straw poll victory which precipitated a break of the hugely significant 2.4% level.

Euro zone had mixed figures on Markit PMI Composite, Markit Services PMI and Markit Manufacturing PMI further weakening the Euro. Pound had a mixed day but with no strong data to support and a stronger Dollar meant Pound had to give away its gains in the recent weeks.

Today’s Market

• EUR IFO Expectations, Current Assessment & Business Climate
• GBP Gross Domestic Product
• USD Durable Goods Orders, Housing Price Index & New Home Sales
• BOC Interest Rate Decision, Rate Statement, Monetary Policy Report & Press Conference

Today’s Focus

Today is a mixed day with data to be released from Europe, UK, USA and Canada. Early morning, we will see Euro zone releasing few Economic Surveys on business climate and expectations. This will be followed with UK GDP figures which is expected to boost the currency amidst Brexit chaos.

By 2nd half of the day we will see US Durable Goods and Housing Data to be released which are expected to boost the Dollar. However, as we have seen throughout the past few weeks politics remains a dominant theme. As Yesterday evening, USD fell on talk that Trump's tax cut plan doesn't have enough votes in the Senate.

It’s an important day for Canadian Dollar. The Bank of Canada raised interest rates in two consecutive meetings, boosting the Canadian dollar. And while growth is strong and inflation is set to pick up, the next moves will be much slower. So, the BOC is expected to leave the interest rate unchanged at 1%. The reaction depends on the message. If the Bank remains optimistic and hints at further hikes in 2018, the loonie could rise. A “wait and see” approach could send the Canadian Dollar down.