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September was marked by some big events that include the FOMC, ECB meetings in the backdrop of the German elections. The month was largely a non-event with most of the outcomes coming in line with market expectations.
The ECB managed to match the expectations although it did not make any major changes. The market reaction was also very well managed by Draghi as the decision to taper is expected to be announced in October. The FOMC meeting saw the Fed announcing its plans to start the balance sheet unwinding from October. The Fed still signaled that interest rates could rise later this year, which saw the markets quickly re-pricing the rate hike, although a lot will hinge on the inflation expectations.
Finally, the German elections were held on September 23. The outcome was again as expected as the CDU/CSU led by Angela Merkel saw another victory. Despite the positive headline, the details showed that the German fringe parties made some inroads at the cost of the CDU/CSU which lost some of its votes. The main opponent, Martin Schulz’s came in second with 20.5%. The coalition is expected to be somewhat tough, but something which Ms. Merkel is not new to.
During September, the biggest winner was the British pound that gained 3.62%. On the tail end, gold prices fell 3.19% followed by the Japanese yen.
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September FX Markets Performance
The month ahead: October 2017
With the Fed and the ECB, both looking to the October monetary policy meeting, the month ahead will see some major changes to monetary policies. It is quite likely that the ECB’s meeting will overshadow that of the Fed’s operations, which in any case seems to be on the back foot.
Here is a quick summary to the major events to look forward to in October 2017.
ECB Monetary policy – Markets fully pricing in the taper announcement (Oct 26th)
All eyes turn to the European central bank this month as the monthly monetary policy meeting is held later in the month on October 26. After months of speculation from the markets and a cautious stance from the ECB’s governing council, the stage is set for the ECB to announce its tapering decision.
