May 20, 2022

Markets remain dependent on policy makers for stability

With US markets closed today for Labor Day, investors will instead hope that Congress can finally deliver another round of fiscal stimulus, as US lawmakers return to work on Tuesday following the August recess. The European Central Bank (ECB) meets…

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With US markets closed today for Labor Day, investors will instead hope that Congress can finally deliver another round of fiscal stimulus, as US lawmakers return to work on Tuesday following the August recess.

The European Central Bank (ECB) meets this week, and are due to update markets with their latest policy decisions on Thursday. With the recent strength of the Euro currency coupled with last week’s disappointing euro area inflation print for August, members could find themselves split between wanting to wait for further clarity on the outlook or feeling pressured instead to take more immediate action. Left unchecked, continued Euro currency strength risks creating a headwind for the region’s exports and in turn risking the relative pace and scale of the eurozone’s recovery.

While underlying economic activity continues to take positive steps on its recovery following the pandemic, it is clear that both economies and markets continue to remain heavily dependent on policy makers’ accommodation. Whether it is hopes of additional asset purchases from the ECB later this week, or a successful brokering of another round of US government spending this side of the US elections in November, both are important for continued risk appetite.

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