Fed hawkishly wakes up market but barriers remain to December hike and significant USD upside

The Fed today surprised financial markets by signalling clearly that were underpricing the likelihood of a December 2015 rate hike, which now seems very much on the table although we will be in a very data dependent world over the next seven weeks. This may provide a fillup for the policy divergence driven USD upside … More Fed hawkishly wakes up market but barriers remain to December hike and significant USD upside

Riksbank after the ECB: Likely QE extension but rate cut not a done deal (SEK weakest if it eventuates)

One of the major impacts of Draghi’s very strong December easing hints last week (see here) is to pass the easing baton back to other previously-dovish central banks (in addition to capping nascent EUR appreciation, being bullish for EA government bonds with likely peripheral spread narrowing and potentially supporting the recent EM FX rebound). Here … More Riksbank after the ECB: Likely QE extension but rate cut not a done deal (SEK weakest if it eventuates)

Draghi throws door wide open to December rate cut, putting ECB credibility on the line

Draghi today exceeded already dovish market expectations of further ECB easing – explicitly signalling that further easing was on the agenda for December, that a further depo rate cut was no longer verboten and revealing that some members played with the idea of easing today. Overall his message that ECB policy is one of “work … More Draghi throws door wide open to December rate cut, putting ECB credibility on the line

Portugal: PSPP dominating electoral uncertainties and macro vulnerabilities

Uncertainty about the Portuguese political situation has persisted after the inconclusive 4 October election. Below I discuss how: (i) a minority centre-right (PaF-led) government remains the most likely outcome but the chances of a left-wing coalition seem to have risen and the uncertainty could persist for several weeks; (ii) several cyclical/structural vulnerabilities mean that Portugal’s … More Portugal: PSPP dominating electoral uncertainties and macro vulnerabilities

BOE preview: becomming more dovish but wanting to see more data

Thursday’s MPC decision and minutes represents an important test of the MPC’s downplaying the impact of international (China/EM) developments on the UK economy and whether MPC want to push back on the substantial repricing of BoE rate hike expectations. Overall, I suspect that they’ll tweak their language to be a bit more dovish but signal … More BOE preview: becomming more dovish but wanting to see more data

ECB monetary policy account to highlight sensitivity to downside risks (VW crisis a fresh macro risk)

In the following I discuss what we might learn from Thursday’s ECB monetary policy accounts, reiterate my view on the likelihood of ECB easing (likely in December) and offer some thoughts on the potential adverse macro impacts of the VW diesel engine scandal. ECB monetary policy accounts Thursday’s ECB monetary policy account (minutes) will be … More ECB monetary policy account to highlight sensitivity to downside risks (VW crisis a fresh macro risk)