Last weeks biggest business, currency, and travel stories: Finance Minister Morneau says no new mortgage rules, the World Bank predicts growth in 2017, a think tank says the US will lose out on jobs by leaving NAFTA, the risks caused by Brexit have been reduced, October’s flash crash was caused by automated trading and other factors, and German GDP is up.
No new mortgage rules
Finance Minister Bill Morneau sat down with experts in Toronto to seek input from economists working in the private sector on the next federal budget. This is fairly routine for Finance Ministers. Last year the Liberal government implemented new mortgage rules aimed at strengthening the housing market by reducing the number of high risk loans. Morneau has said that no new rules will be put forward this time.
Moderate World Growth
The World Bank has predicted moderate global GDP growth in 2017. The institution forecasts growth of 2.7% in 2017, compared to 2.3% in 2016. There is serious uncertainty in the market thanks to the US election and the unclear policies of the new administration.
Nada to gain by leaving NAFTA
A report from the Center for Automotive Research (a think-tank based in Michigan) has suggested that pulling out of or radically altering NAFTA could cost the US over 30,000 jobs. President-elect Trump has indicated that he favours protectionist policies which could threaten NAFTA. Trump has suggested that leaving NAFTA would benefit the US but experts disagree. Canada’s economy has been boosted by NAFTA and any threat to the trade deal could cast shade on the Canadian economy.
No Brexit, no cry
Mark Carney, the Canadian-born Governor of the Bank of England told UK MPs that the immediate risks created by Brexit have declined. Overall the risk level remained higher than before Brexit, but the country has escaped the immediate negative economic impact predicted by some economists and politicians. Carney said that the economic forecast had improved but also urged for a period of transition, and encouraged the government to seek continued access to the eurozone.
Blame the robots
According to the Bank for International Settlements (BIS) the 9% drop in the price of GBP on October 7th against the USD was caused by multiple factors, but not a so called “fat finger” trade (when someone makes an order much larger than intended). The sell off may have been initially triggered by comments by French President Hollande who commented on a “hard Brexit”. From there, the BIS places the blame for the subsequent ‘flash-crash’ primarily on the time of day (when there were few sterling traders operating), and automatic trades dictated by trading algorithms. As trading algorithms grow more common the market may become more volatile according to the BIS.
German Domestic Product
Initial estimates from Germany’s Federal Statistical Office suggest that the country’s GDP has grown by 1.9%, with a Q4 estimate of 0.5% growth. Official numbers won’t be released until next month. Germany grerw by 1.6% in 2014, rising to 1.7% in 2015. Germany is the wealthiest and most populous state in the eurozone and plays a major role in dictating monetary policy for the euro. The ECB is still keeping rates low and continuing a fairly aggressive bond-buying policy (both of which suppress the value of the euro) due to continue until around 2019.
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