Friday December 8, 2017 - 19:15:17 GMT
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Busy Week Ahead For Major Central Banks. Fed Rate Hike Widely Expected
John M. Bland, MBA, co-founder, global-View.com
Fed Hike a Done Deal The financial markets have already priced in a 25bp rate hike at the FOMC meeting next week (December 13) with the target range for Fed funds moving higher from 1.00-1.25% to 1.25 to 1.50%. Given that this move is widely discounted, it is difficult to guess how the markets will react to this decision. Markets are always forward looking, but we have to wonder if Fed Chair Yellen will want to hamstring Fed Chair designate Jerome Powell with a a forward rate hike signal in addition to a rates hike before he comes into office early next year. As for the Fed “dot plots”, odds favor central bank governors predicting three rate hikes over the year in 2018.
U.S. Employment data in November 2017 were a mixed bag again. Non-farm payrolls grew by 228K vs. street estimates for +200K. The unemployment rate remained at a seventeen year low of 4.10%. I continue to doubt this calculation. Recently, the focus of the markets has shifted away from payrolls to average hourly earnings, which increased by only 0.20% in November. The lack of growth in earnings suggests to many that there is a lot more slack in the labor market than the headline data might suggest. There is a possibility that the next regime at the Fed will focus on the lackluster wage growth and favor a more cautious policy tightening stance than may currently are favoring for 2018.
Bank Of England And European Central Bank Decisions Awaited The week ahead also sees the final policy meetings of the year for the Bank of England and the European Central Bank. The Bank of England is widely seen as likely to hold its target refi rate steady at 0.50%. U.K. GDP is seen likely to hold close to its current 1.50% and inflation is seen as close to peak levels above its 2.00% target. Most do not expect a rate hike before mid-2018.
No change in ECB is expected any time soon. They have already announced a reduction in their monthly asset purchases to EUR 30 bln from EUR 60bln. They are to remain at this level unto the end of September 2018. They have also announced that the bank will not raise rates until their asset purchasing program has run its course. The ECB will also announce its latest economic forecasts at this meeting. There will be a lot of interest in their latest inflation forecasts.
Amazing Trader EVENT RISK Calendar:
Tue 12 Dec
09:30 GB- CPI
10:00 GB- ZEW Survey
13:30 US- PPI
Wed 13 Dec
00:30 AU- Employment
09:30 GB- Unemployment
13:30 US- CPI
15:30 US- EIA Crude
19:00 US- Fed Decision
Thu 14 Dec
07:30 CH- SNB Decision
All Day- Global- flash PMIs
12:00 GB- Bank of England Decision
12:45 EZ- ECB Decision
13:30 US- Retail Sales
13:30 US- Weekly Jobless
14:45 US- Industrial Production
Fri 15 Dec
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
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