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  • The ECB meeting was as dovish as we expected. It is unlikely that interest rates will increase in 2019 as the Central Banks economic forecasts were materially downgraded. GDP growth for 2019 is now expected to be 1.1% (down from 1.7%) as the China slowdown, German auto sector woes and uncertainty as a result of Brexit have a detrimental impact on the economy. Mario Draghi highlighted that there remain downside risks to their economic outlook and that inflation will not approach their stated target until post 2021.
  • There was plenty of “noise” last week associated with the Brexit process but ultimately the UK were unable to negotiate any concessions from their European partners. The vote in the House of Commons on Tuesday (and possible subsequent votes on Wednesday and Thursday) could provide a definitive guide to the conclusion of this wearying process.  At this stage, several options remain open (approval of Theresa May’s deal, a new referendum and or a general election) but an extension to negotiations will require Euro members approval which will not be forthcoming without valid reason.
  • Jay Powell (Federal Reserve Chairman) in an interview on CBS’s 60 Minutes highlighted that the Fed will remain patient with regards monetary policy. Powell acknowledged that a slowdown in growth in China and the Eurozone could have implications for the US economy and their future actions.
  • Whilst Powell was cautious about the possible future outlook for the US economy recent wage growth figures (see graph on Average Hourly Earnings y/y) indicated a robust labour market that is becoming increasingly tight. Consumer spending represents circa 70% of the US economy and real wage growth coupled with an accommodating Federal Reserve should provide short term positive investor sentiment towards US risk assets.