Publication date: 5 May 2017 | Covering: April 2017
Monthly Briefing
- No April FOMC meeting; next meeting May 2–3; June rate hike expectations remain elevated
- US strikes Syria with 59 Tomahawk missiles April 7 in response to chemical weapons attack on Khan Shaykhun
- MOAB — largest non-nuclear bomb in US arsenal — dropped on ISIS tunnels in Afghanistan April 13
- French presidential first round April 23: Macron and Le Pen advance to May 7 runoff; Filââââlon eliminated; markets relieved
- US Q1 GDP expected weak; global growth synchronised; UK Article 50 triggered March 29
- BOJ easing; Jamaica growth improving; NHT J$6.5 million ceiling; rates 0, 2, 4 per cent
Geopolitical Flashpoints Dominate April
April 2017 was a month defined less by central bank policy — there was no Federal Reserve meeting during the month — than by a series of dramatic geopolitical events that kept global markets on edge even as broader equity indices continued their post-election advance. The most significant US military action in years occurred on 7 April, when the United States launched 59 Tomahawk cruise missiles against the Shayrat air base in Syria, held responsible for a chemical weapons attack using sarin on the town of Khan Shaykhun two days earlier that killed more than 80 civilians. The US action was the first direct US military strike against Syrian government forces and represented a departure from the Obama administration’s approach. Reactions were split: US allies in Europe and the Middle East largely supported the strike, while Russia and Iran condemned it. The action briefly boosted safe-haven assets and lifted the dollar before markets returned to their prior range. Less than a week later, on 13 April, the US military dropped the GBU-43/B Massive Ordnance Air Blast bomb — the largest non-nuclear bomb in the US arsenal, known as MOAB — on an ISIS tunnel complex in eastern Afghanistan. The back-to-back military actions signalled a more assertive US posture globally, with significant implications for geopolitical risk premiums.
French Election First Round: Europe Relieved
The first round of the French presidential election on 23 April produced results that broadly reassured financial markets. Emmanuel Macron of the centrist En Marche! movement and Marine Le Pen of the far-right National Front advanced to the run-off scheduled for 7 May, while the mainstream conservative François Fillon and the far-left Jean-Luc Mélenchon were eliminated. The result confirmed that France would not have a candidate from either of the two traditional governing parties in the final round for the first time in the Fifth Republic’s history. Markets’ primary concern had been the scenario of a Le Pen-Mélenchon run-off, both of whom had expressed hostility to the euro and European institutions in varying degrees. The Macron-Le Pen final, with polls showing Macron well ahead, was seen as the most market-friendly possible outcome. European equities rallied sharply on the first-round result, the euro strengthened, and French government bond yields fell. The risk that France might move toward eurozone exit or serious euro rupture receded substantially in the view of financial markets.
Article 50 and the Brexit Process Begins
Just before this review period, on 29 March, Prime Minister Theresa May formally triggered Article 50 of the Treaty on European Union, initiating the two-year withdrawal process that will culminate in the United Kingdom’s departure from the EU by 29 March 2019 at the latest. The formal notification was delivered to European Council President Donald Tusk, and the EU’s draft negotiating guidelines were published shortly thereafter. The guidelines made clear that the EU would insist on sequencing: progress on citizens’ rights, the financial settlement, and the Irish border before agreeing to discuss the future UK-EU trade relationship. The UK government’s position on sequencing was more fluid, preferring parallel rather than sequential talks. For Caribbean Commonwealth members, the beginning of the formal Brexit process was a significant moment: the terms of post-Brexit UK-Caribbean trade and development assistance relationships had entered the phase of active negotiation with genuine consequences for Jamaica’s access to UK markets for goods and services, including tourism.
Jamaica Mortgage Market in April
Jamaica’s mortgage market was relatively quiet through April in terms of major policy developments. The absence of a Federal Reserve meeting removed one source of potential volatility, and geopolitical events in Syria and Afghanistan, while significant globally, had limited direct financial transmission to Jamaica beyond commodity price effects. The Bank of Jamaica’s accommodative monetary policy continued to provide a supportive backdrop for domestic lending conditions, with commercial mortgage rates edging lower as the easing cycle fed through the financial system. The NHT’s J$6.5 million individual ceiling and tiered rates of 0, 2, and 4 per cent remained the cornerstone of the affordable housing finance segment. Property market activity in the April school-holiday period was broadly seasonal, with the new financial year bringing fresh budgets and renewed purchasing attention from qualified buyers.
Looking Ahead
The May 7 French presidential run-off will be the first major event to watch, with markets having already partially priced in a Macron victory. The Fed’s May 2 to 3 meeting is expected to hold, with June the next live date for a rate increase. The UK’s snap general election called by May for 8 June adds another layer of political uncertainty to the Brexit process. For Jamaica, the IMF programme review and the preparation for the 2017 Atlantic hurricane season — which officially begins 1 June — are the principal near-term focal points for the property and finance sector.
Mortgage & Housing Finance Disclaimer: This publication is for general information only and does not constitute mortgage, financial, legal or investment advice. Mortgage products, lending criteria, interest rates and borrowing costs vary between lenders and may change without notice. Readers should obtain independent advice from a qualified mortgage adviser, financial adviser or legal professional before making financial or property decisions.
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