Roundup: Policymaker Updates That Moved the Markets This Week

There might not have been a lot of tier-1 reports on tap and most of our European comrades might have gotten a shortened trading week, but these speeches and updates by monetary and fiscal policymakers sure livened up trading volatility!

Here are market-moving updates that you might have missed throughout the week:

RBA: Labour and housing market conditions are “weaker than expected”

In case you missed the 6 takeaways that we’ve listed, you should know that members of the Reserve Bank of Australia (RBA) have communicated their concern that the labour and housing markets are “weaker than expected” in early 2017.

Remember that the central bank is aiming to boost household consumption by keeping its interest rates low. Thing is, the low interest rate environment and other factors have resulted in crazy (and maybe unsustainable) borrowing from investors and households that have limited wage growth.

But the RBA can’t just raise its rates either, at least not if the members want to achieve their inflation targets.

For now, the RBA has warned that “developments in the labour and housing markets warranted careful monitoring over coming months.” For many traders, this suggests that the central bank’s next move would likely be a cut than a rate hike. No wonder the Aussie fell like there’s no tomorrow!

BOJ’s Kuroda: Inflation target still “a long way to go”

Yesterday, Bank of Japan (BOJ) Governor Haruhiko Kuroda dismissed speculation that the central bank is ready to ease the pedal from the metal.

In an interview in New York, Kuroda shared that it’s “premature to discuss in an exact way about exit strategy” because the real economy is still sluggish even if it’s better than they had anticipated months ago.

The BOJ head honcho also shrugged off concerns that it’s running out of bonds to buy, saying that, “We have acquired about 40% of JGBs outstanding. But that means that 60% is still in the market.

On theories that the central bank will soon allow a bit of room for JGB yields to go up, Kuroda said that “We stick to yield curve control. Under yield-curve control, purchases may decline or increase but we think the current pace of purchases and monetary base increase will continue for some time.

Kuroda did admit that the yen’s strength could make policy making more difficult. He said that a strong yen would delay the achievement of the BOJ’s 2.0% inflation targets, while a weak yen would have the opposite effect. Still, he repeated that the BOJ’s policies are aimed at price stability, and not at exchange rates.

At the end of the day, BOJ members still believe that there are no signs of consumer prices shifting up. This is why, even after four years of aggressive easing, Kuroda still maintains that “The target is 2% — we’re still around 0.0%. So it’s a long way to go.

Whether or not it was due to Kuroda’s dovish speeches or profit-taking ahead of this weekend’s French Presidential elections, the yen ended up taking a breather from its sharp gains this week.

Mnuchin: Trump’s tax plans to be presented “very soon”

What’s a trading week without a dose of Trump and his policy plans, amirite? In the absence of top-tier reports, market players obsessed over Steven Mnuchin’s comments regarding Trump’s tax plans.

In an interview with the Financial Times last Monday, the U.S. Treasury Secretary backed Trump’s earlier comments that the dollar is “getting too strong.” He said that it’s “factually correct” since a strong dollar can “hurt our exports” in the short-term.

In the long-run, though, Mnuchin still believes that “As the world’s currency, the primary reserve currency, I think that over long periods of time the strength of the dollar is a good thing,” because “it’s a function of the confidence and the strength of the US economy.

Naturally, the Greenback received support on the notion that Trump is okay with a strong-dollar policy in the long-term.

Mnuchin wasn’t as consistent with his remarks on Trump’s tax plans. Last Monday, he shared that the plan “started as [an] aggressive timeline” and that “it is probably delayed a bit because of the healthcare.

However, in a speech in Washington yesterday, the Treasury Secretary did an about-face and shared his confidence that “we’re going to get tax reform done” whether or not Obamacare gets repealed.

More importantly, he now believes that the White House will present a “major tax reform” “very soon.” Mnuchin didn’t give a schedule, but he hinted that passing an overhaul of the tax code will not “take till the end of the year.”

Since Trump’s campaign promise to overhaul the tax code is one of the top reasons why the markets had rallied since his inauguration, it’s no surprise that the dollar, along with other U.S. assets, got a boost during the trading session.

Saudi Arabia’s Energy Minister: “Consensus is building”

In an energy conference in UAE last Thursday, Saudi Arabia Energy Minister Khalid al-Falih took a shot at talking up the Black Crack by hinting that the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC countries are considering an extension of its output cut deal.

If you recall, back in December OPEC and non-OPEC but energy-producing friends decided to take one for the team and agree to cut their oil production for six months. The goal? To lessen the global oil glut and hopefully boost prices higher.

Unfortunately, the U.S. said “no thanks” and went on with its oil-producing ways. Fast forward to today when oil prices are almost (but not quite) back to their pre-deal levels after reports suggested that the production cuts aren’t doing much in the greater scheme of things.

Al-Falih said that “Consensus is building, but it is not done yet,” adding that “We are talking to all countries. We haven’t reached an agreement for sure, but the consensus is building.

Kuwait’s Oil Minister Essam al-Marzouq, who chairs a committee that measures compliance with the cuts, supported the notion and noted that compliance is rising among non-OPEC countries.

The jawboning worked…for a minute or two. Traders soon asked questions like “how long will the deal be extended?,” “Who’s g and who’s not?,” and “how much will they cut?” Since the announcement brought more uncertainty than info, oil prices soon went back to their intraweek downtrends.