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Bank Of England’s (BoE) March Meetin

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The Bank of England’s (BoE) March meeting (one of the small meetings without updated projections or a press conference) ends today and we do not expect it to make any policy changes. We expect the BoE to maintain the Bank Rate at 0.25% and keep its neutral stance by repeating that it could move in ‘either direction’. This is widely expected, so we do not expect big movements in the GBP or UK yields.

We expect Norges Bank to stay on hold with no major changes in signals about the rate path. The growth outlook is better than was expected at the December meeting. The regional network survey indicated growth of around 2.0%, that unemployment has fallen further than expected and that employment appears to be rising more quickly than expected.

In Sweden, the labour force survey is due today, including the unemployment rate, employment and hours worked, which is widely expected to demonstrate continued strong employment growth and an unemployment rate posing as white noise (due to the unintelligible on/off influx of migrants into the labour force).

Selected market news

Not even a blizzard could keep the Fed and Janet Yellen from delivering the much anticipated 25bp rate hike yesterday. Despite the tightening of monetary policy, equities extended their gains from the early hours, bond yields pushed lower and USD lost some ground, as the Fed did not signal that the number of rate hikes expected for 2017 and 2018 has increased. This caused some relief in the market that the Fed was not going to increase the hiking cycle going forward. See more in our FOMC review (http://bit.ly/2mPRDdb).

As expected, the Bank of Japan (BoJ) kept its monetary policy unchanged at its two-day meeting ending this morning, saying that it will keep its target for the short-term policy interest rate unchanged at -0.1% and continue to purchase Japanese government bonds (JGBs) so yields on 10Y JGB remain around 0%. Despite general upward pressure on US and global yields, which clearly increases the pressure on the BoJ’s willingness to maintain its current yield curve control policy, there were little changes in the statement, and no hints that the BoJ is considering raising its 0% target on the 10-year yields on JGB.

As the results of the Dutch election keep ticking in, it seems more apparent that Prime Minister Mark Rutte’s VVD once again will be the largest party in the Netherlands with 32 of the parliament’s 150 seats, according to Reuters. What might be even more important is the fact that Geert Wilders’ PVV only seems to have claimed 19 of the seats in parliament. Albeit an increase from the previous election, it is less than most polls suggested and a lot of people ‘feared’. See more here.

The gains in the US have spilled into the morning session in Asia with major indices up and especially Hang Seng having increased by more than 1% at the time of writing. This bodes well for a strong European opening for both Fixed Income and equities.

Danske Bank
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