European government bonds are strengthening this morning, following Geert Wilder’s failure to claim first place in the Dutch election.
French debt is in demand, as investors take it as a sign that Marine Le Pen might be thwarted in her bid to win the presidency.
Business Live has more on the market reaction:
The euro hit a five-week high this morning, touching $1.0746 against the US dollar.
That’s partly because the dollar is weaker across the board, after the US Federal Reservewas more cautious than expected about future interest rate hikes yesterday.
But the Dutch election is also a factor.
Naeem Aslam of Think Markets explains:
It is all over and public has put an end to the nonsense populist concept which started with Brexit. Dutch prime minister Mark Rutte has comfortably beaten the anti-Islam Freedom party.
We have a moment of calm and this has helped the euro to rally as everyone breathes a sigh of relief. Mr Wilders’ victory could have provided a tailwind for Marine Le Pen’s presidential campaign in France, which could have put the future of the euro in jeopardy.
It’s Bank of England Day! Over in Threadneedle Street, in the heart of the City, Britain’s central bank is putting the finishing touches to this month’s decision on monetary policy.
We don’t expect a change on interest rates, which are currently at a record low of just 0.25%. But the minutes of the meeting will be poured over for signs that the Bank may be considering whether to tighten policy in response to rising inflation.
The decision comes at noon.
Analysts at PNC believe that yesterday’s unemployment figures, which showed falling pay growth and a rise in self-employment, will encourage the Bank to sit tight for several months.
Lower wage growth and a shift to self-employment (possibly a disguised form of underemployment) reinforces our view that slack has increased in the British labor market since the June 2016 Brexit referendum, making a bank rate hike unlikely in 2017.
Another reason not to expect a rate hike is that the BoE’s MPC believes Brexit will be a headwind to British output over the medium term, for example by reducing market access for British services exports to EU end-markets which account for 5 percent of the UK’s GDP.
We’ll also be mopping up reaction to last night’s US interest rate rise. As we blogged, the Federal Reserve raised borrowing costs to 1%, but maintained a cautious approach to normalising monetary policy.
That sparked a rally on Wall Street last night, and Europe is likely to follow suit his morning.
FXTM Chief Market Strategist Hussein Sayed says:
“Thank you, Janet Yellen,” this is today’s market message to the U.S. Fed Chair.
The greenback [US dollar] is falling while everything else is in green today after the Federal Reserve delivered on its promise to hike rates by 25 basis points. While this move was widely expected, many market participants were positioned for a more hawkish language and an upgrade in economic projections which didn’t happen.
Geert Wilders Falls Short as Wary Dutch Scatter Their Votes
By ALISSA J. RUBIN
The New York Times
MARCH 15, 2017
THE HAGUE — The far-right politician Geert Wilders fell short of expectations in Dutch elections on Wednesday, gaining seats but failing to persuade a decisive portion of voters to back his extreme positions on barring Muslim immigrants and jettisoning the European Union, according to early results and exit polls.
The results were immediately cheered by pro-European politicians who hoped that they could help stall some of the momentum of the populist, anti-European Union and anti-Muslim forces Mr. Wilders has come to symbolize, and which have threatened to fracture the bloc.
Voters, who turned out in record numbers, nonetheless rewarded right and center-right parties that had co-opted parts of his hard-line message, including that of the incumbent prime minister, Mark Rutte. Some parties that challenged the establishment from the left made significant gains.
The Dutch vote was closely watched as a harbinger of potential trends in a year of important European elections, including in France in just weeks, and later in Germany and possibly Italy. Many of the Dutch parties that prevailed favor the European Union — a rare glimmer of hope at a time when populist forces have created an existential crisis for the bloc and Britain prepares for its withdrawal, or “Brexit.”
“The Netherlands, after Brexit, after the American elections, said ‘Whoa’ to the wrong kind of populism,” Mr. Rutte told a wildly enthusiastic crowd, excited that his party, the People’s Party for Freedom and Democracy, had come in first among the parties and lost fewer seats than it had feared.
“Today was a celebration of democracy, we saw rows of people queuing to cast their vote, all over the Netherlands — how long has it been since we’ve seen that?” Mr. Rutte said.
Tags: anti-immigrant, Bank of England, Donald Trump, Dutch, Dutch election, Dutch general election, Elites, Federal Reserve, Geert Wilders, globalization, Interest Rates, Mark Rutte, nationalism, netherlands, Party for Freedom, populism