Last Friday, the Euro slumped to a three-month low of 1.1625 against the US Dollar, after the European Central Bank extended its Bond buying program by nine months to September 2018 at a pace of 30 billion Euros per month starting January 2018. ECB chief Mario Draghi said “an ample degree of monetary stimulus remains necessary”, as inflation has yet to show signs of a sustained upward trend. Moreover, the ECB’s cautious approach highlighted the difference between the Fed, which is poised to raise rates in December 2017 as it continues to normalize monetary policy.
The US dollar rallied to its highest since July 12 against its major peers after the US House passed a budget resolution seen as advancing the prospects for tax reform. Meanwhile, Donald Trump continued to string out his choice on the next Fed leader, giving mixed signals on his preference. The emergence of Powell and Taylor as Trump’s two favourites puts the selection into much cleared focus, as the decision could have major implications for both the economy and the Fed.
Oil prices surged last Friday as well, with Brent Crude approaching $60 a barrel, buoyed by comments from Saudi Arabia’s Crown Prince saying that the kingdom would support extending the output cut in a bid to stabilize Oil demand and supply. The OPEC and some non-OPEC producers including Russia have pledged to curb their production by around 1.8 million barrels per day until the end of March 2018 to drain a global supply glut. OPEC will meet on November 30, 2017 in Vienna and is expected to discuss extending that agreement.