IronFX Daily Commentary by Sakis Paraskevov | 16/12/2015
December 16, 2015 12:36 pm
• FOMC meeting: A breath ahead of a possible rate hike • Market participants are aligned behind the first rate hike in nearly a decade, with expectations of a 25bps increase. An improvement in labour market data and the rise in inflation are the main drivers behind the expected hike. • The central bankers have stated that if they delay “lift off”, the tightening cycle might not be as gradual as they like. • With an implied market probability of above 80% of the first hike occurring today, the market focus will be on the statement accompanying the decision regarding the pace of future hikes. • A dovish statement mapping out prolonged pauses between hikes, accompanied with a downward revision of the “dots” could weaken the dollar. On the contrary, a more hawkish statement setting out a liftoff path with short intervals between hikes, and perhaps with no downward revision of the “dots”, could prove bullish for the greenback. • The ‘dot path’ the FOMC members projected in September is much more hawkish than current market expectations. • The dollar’s reaction will highly depend on the signaled path of future policy. • Today: • France, Germany & Eurozone: Preliminary manufacturing and service-sector PMI data for November. A decline in most preliminary PMI indices could weaken EUR. • UK: Employment report for October. The unemployment rate is expected to have remained unchanged while average earnings are expected to have slowed. Given that the UK had a negative inflation for the same month, real wage growth is still strong. Thus, a solid jobs report could support GBP. • Eurozone: Final CPI for November. It is expected to confirm the preliminary estimate. • US: Besides the FOMC meeting, we have housing starts, building permits and industrial production all for November, as well as the preliminary Markit manufacturing PMI for December. • Speakers: Fed Chair Yellen holds a press conference following the FOMC decision.
• FOMC meeting: A breath ahead of a possible rate hike
• Market participants are aligned behind the first rate hike in nearly a decade, with expectations of a 25bps increase. An improvement in labour market data and the rise in inflation are the main drivers behind the expected hike.
• The central bankers have stated that if they delay “lift off”, the tightening cycle might not be as gradual as they like.
• With an implied market probability of above 80% of the first hike occurring today, the market focus will be on the statement accompanying the decision regarding the pace of future hikes.
• A dovish statement mapping out prolonged pauses between hikes, accompanied with a downward revision of the “dots” could weaken the dollar. On the contrary, a more hawkish statement setting out a liftoff path with short intervals between hikes, and perhaps with no downward revision of the “dots”, could prove bullish for the greenback.
• The ‘dot path’ the FOMC members projected in September is much more hawkish than current market expectations.
• The dollar’s reaction will highly depend on the signaled path of future policy.
• Today:
• France, Germany & Eurozone: Preliminary manufacturing and service-sector PMI data for November. A decline in most preliminary PMI indices could weaken EUR.
• UK: Employment report for October. The unemployment rate is expected to have remained unchanged while average earnings are expected to have slowed. Given that the UK had a negative inflation for the same month, real wage growth is still strong. Thus, a solid jobs report could support GBP.
• Eurozone: Final CPI for November. It is expected to confirm the preliminary estimate.
• US: Besides the FOMC meeting, we have housing starts, building permits and industrial production all for November, as well as the preliminary Markit manufacturing PMI for December.
• Speakers: Fed Chair Yellen holds a press conference following the FOMC decision.
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