The Day So Far
A fairly subdued morning thus far despite the surprisingly strong performance of Prime Minister Mark Rutte in the Dutch election. With over 90% of the votes counted so far Rutte’s Liberal Party are set to capture 33 seats in the 150-seat lower house of parliament with Geert Wilders Freedom Party picking up just 20 seats.
Many see this as a significant blow to the populous movement that has swept the globe in the past 12-months and it may well serve as a good litmus test for sentiment heading into the arguably much more important French election which commences at the end of next month. Indeed, watching opinion polls of the voting intentions of the French public in the coming days maybe telling to see whether this latest event has had any influence on overall sentiment. When looking as to why did Wilders not receive the level of backing some were predicting there are several things to consider, but the one I believe has had the biggest impact is the failure of Trump to deliver on any of his campaign pledges, especially the inability to push through this travel ban targeted specifically as Muslim counties, an area of which Wilders built his own campaign on. Unlike Brexit which was the belief in an ideal the difference with Trump and Wilders is that it has been driven largely by an individual and as such given the lack of ‘real’ impact Trump has had and how he has been viewed outside the borders of the US maybe reflective of the first signs that people are tiring of opting for change for it only to produce an overall worse than expected outcome. Likewise if UK economic data continues to deteriorate then Le Pen’s Euro-sceptic view may well become less appealing to the masses.
Meanwhile, the bigger driver of markets at present has been the ‘dovish-hike’ from the Fed which caught participants somewhat of guard given the hawkish communication from numerous Federal Reserve officials heading into the event. The latest dot-plot projections were telling with only 2019 seeing a minor upward revision which disappointed those looking for a more steeper trajectory.
Moving forward, markets will likely be eyeing June as the next meeting of significance which would coincide with the next update to the Summary of Economic Projections and keep the Fed on track for three hikes in 2017.
The Day Ahead
The Bank of England interest rate decision is scheduled for midday and much like the Bank of Japan overnight I expect it to pass with little impact to the broader market as they remain in wait-and-see mode over the pace of rising inflation as it nears its 2% target. You can review more on this in my briefing delivered earlier this morning. Meanwhile there are several pieces of economic data coming out of the US but none of which I see as being market moving given the close proximity of the latest Fed communication.