Market movers today
FOMC minutes tonight are likely to confirm that the Fed is on track for a December hike, although with the market pricing this in with around a 70% chance, it may not change expect ations much. However, the minutes may reveal more about how the Fed’s balance between a stronger economy and still too low inflation is viewed. Previous minutes have shown diverging views with one camp (majority) trusting the Philips curve (lower unemployment leads to wage pressure eventually) while another camp is in favour of await ing clearer signs that inflation is actually moving towards the Fed’s target of 2%.
Today, we will also have Fed speeches by Evans (voter, dovish) and Williams (non-voter, neut ral).
The ECB’s Peter Praet is due to speak tonight in New York. It seems that market consensus is moving in the direction of a ‘lower for longer’ QE extension , i.e. EUR20 or EUR30bn for nine months due partly to recent signals from Praet .
In Scandi, Sweden is due to release Prospera inflation expectations.
Selected market news
Catalonian President Carles Puigdement last night refrained from making a formal declaration of independence. Addressing the regional parliament in Barcelona, Puigdement called for more dialogue with Spain while maintaining that the result of the referendum on 1 October had given his government a mandate to pursue independence but that he would hold off for ‘a few weeks’ while negotiations take place. Focus now turns to the response from Madrid as Prime Minister Mariano Rajoy meets with his cabinet today.
EUR/USD barely moved during and after Puigdement’s speech last night . The Bund future sold off slightly after the speech and while uncertainty prevails, the move suggests that on the margin it could be positive for Spanish government bonds on the opening today.
The IMF has lifted its global growth forecast for 2017 to 3.6% from 3.5% and for 2018 global growth is lifted 0.1 percentage points to 3.7%, the highest since 2010. Moreover, the US forecast is raised 0.2 percentage points to 2.3%, euro growth raised to 2.1% from 1.9% and China growth lifted from 6.7% to 6.8%. The global GDP forecast is broadly in line with our own project ions – we forecast 3.6% for both 2017 and 2018.
US President Trump last night said that he plans to make changes to his tax plan within the next few weeks without specifying which kind of changes he expects to make.