Market movers today
The main event of the day is the Article 50 triggering by the UK and the EU’s Brexit guidelines, which should be published within 48 hours of Article 50 being triggered.
In the US, there are a number of Fed governors set to speak publicly. These may provide further impetus to the future of US monetary policy stance amid renewed uncertainty about US fiscal policies.
The data calendar is otherwise rather thin.
Selected market news
The biggest focus for the markets today will be the UK government’s triggering of Article 50 and the response by the EU. We lay out today’s likely timetable in our Brexit monitor, due out later this morning. The UK is expected to send a Brexit letter to the EU following a cabinet meeting at 9:00 CET, followed by a response from Donald Tusk on the EU side once he receives the letter. This will mark the start of a negotiation period of up to two years, which may get off to a difficult start as there appear to be differences of views between the UK and EU about the focus of the discussions from the outset. One of the likely casualties of the ‘divorce’ talks will in our view be the GBP, which is indeed trading weak this morning, but the wider UK economy has also recently showed signs of ‘Brexit stress’, with consumers turning more pessimistic.
In Asia, the markets do not appear to be have been hit by Brexit fears yet as they are generally trading on a positive note this morning. One of the driving forces for the positive risk sentiment is probably the very strong US consumer sentiment number, which was released yesterday. The number showed that the US consumer is the most upbeat in more than sixteen years. The strong consumer survey goes well with our view that private consumption is still the main driver of US growth. The combination of positive risk sentiment and the strong US consumer survey number sent oil prices higher.
Following Fed governor Charles Evans’ speech two days ago, Stanley Fischer said yesterday that two additional rate hikes this year ‘seem about right’ given the outlook for the US economy. This is in line with our view, seeing additional rate hikes being undertaken in July and December. Financial markets are pricing in a rate hike with about a 53% probability for June already.