This post dissects the recent rally in risk assets and examines the prospects going forward. The main points are: • A combination of (inter-related) factors have supported risk appetite: (i) The Fed’s suprising dovishness on 16 March, with apparent more focus on the international impacts of its actions and greater willingness to let inflation run … More Markets after the Fed: Carry on?
Financial markets remain sceptical about further US rates rises heading into the tomorrow’s FOMC announcement. Less than one Fed rate increase in 2016 is fully priced, although the current 80% probability contrasts with only 10% a few weeks ago, whereas in December the Fed signalled four rate hikes in 2016. While a rate increase this … More Yellen to cautiously leave door open to June hike
The ECB today vindicated my arguments for an aggressive broad monetary policy easing: rate cuts, QE expansion and credit easing at very attractive rates exceeded market expectations but were more in line with my views (I’d hoped for a 20bp deposit rate cut, accompanied by tiering of interest rates, rather than the whole rate corridor … More Draghi fires credit-easing bazooka but undermines market impact
My accompanying post details how the return of EA deflation, EA inflation expectations are in the process of de-achoring plus deteriorating EA and foreign activity mean that the 10 March ECB meeting is shaping up to be make or break for EA prospects and ECB credibility. I argued that the likely downward revisions to the ECB’s … More Trading the ECB: limited EUR weakness and bund rally likely but risks
The 10 March ECB meeting is shaping up to be make or break for EA prospects and ECB credibility as well as being very important for overall market directions. Deflation has returned to the EA, pipeline inflation pressures are weak and inflation expectations are in the process of de-achoring (with inflation breakevens’ previous links with … More ECB preview: Wonderstuff? Don’t let me down!