The Ides of March has arrived at last with the potential for significant market moving developments. US indices and the FTSE are up 0.2% so far today. The US Dollar is down slightly enabling GBP, EUR and CAD to bounce back while gold and JPY are holding steady.
The main event for the US today is the FOMC decision due at 200 pm. The Fed is expected to raise interest rates by 0.25% and it would be a huge surprise if they didn't. Traders may focus more on the statement, economic forecasts and particularly the Fed Funds end of year forecast aka the Dot Plot.
The Fed's party line for this year has been for three hikes but an increase today would open the door to four at a gradual quarterly pace. If the Fed stays at three, it would suggest they acted now to give themselves some flexibility in case the debt ceiling or some other issue causes disruptions later in the year. It appears the Fed may be becoming more proactive after stalling its way into a corner in both 2015 and 2016.
Today’s US data shows inflation pressures continuing to build keeping the pressure on the Fed to raise interest rates several times this year. Retail sales and Empire Manufacturing were mixed but not disappointing enough to undermine the hawkish case.
The big event for trading in Canada today is the release of US DOE inventories at 1030 am EDT. Yesterday the TSX underperformed its US peers due to a 10% plunge in Valeant Pharmaceuticals and another big drop in energy stocks as the oil price collapse continued. After the exchanges closed, however, WTI rebounded as API reported a 0.5mmbbl drop in US oil inventories. WTI is now up 1.9% overnight heading into the DOE report where the street has been looking for a 3.2 mmbbl increase. This news could keep oil and energy stocks active through the day.
In Europe, the focus today is on the Netherlands election, where the Liberals are widely expected to win. The Euroskeptic Freedom Party (PVV) is running in second and may be picking up momentum following a diplomatic incident with Turkey over the weekend. A win by pro-Euro forces in a core EU country could help to maintain the status quo and deal a setback (but not a defeat) to the forces of change. On the other hand, if Wilders were to win it would be seen as a big defeat for the pro-EU side and could pressure the Euro.
In the UK today, Brexit and employment are in focus. UK jobless claims fell more than expected and the unemployment rate was better than expected but these positives were offset by lower than expected wage inflation. Meanwhile, despite calls for a second referendum from the SNP, a poll shows support for the Union rising not falling as Brexit approaches.
The potential for big news continues with more central banks meeting tomorrow including the Bank of Japan, Bank of England, Norges Bank, and Swiss National Bank. The US preliminary budget request is expected later this week. Plus we could see more talk on trade Friday with G20 finance ministers meeting in Germany and Chancellor Merkel meeting President Trump in Washington.
There have been no major corporate announcements so far this morning.
US consumer prices 2.7% as expected vs previous 2.5%
US core CPI 2.2% as expected
US retail sales 0.1% as expected vs previous 0.4%
US retail ex auto 0.2% vs street 0.1% vs previous 0.8%
US Empire Manufacturing 16.4 vs street 15.0 vs previous 18.7
UK jobless claims change (11K) vs previous (42K)
UK 3M employment change 92K vs street 87K vs previous 37K
UK ILO unemployment rate 4.7% vs street 4.8%
UK average weekly earnings 2.2% vs street 2.4% vs previous 2.6%
Japan industrial production 3.7% vs previous 3.2%
Italy retail sales (0.1%) vs street 0.8%
Upcoming significant economic announcements include:
10:30 am EST US DOE crude oil inventories street 3.0 mmbbls vs prev 8.9
10:30 am EST US DOE gasoline inventories street (2.0 mmbbls) vs prev (6.5)
10:30 am EST US DOE distillate inventories street (1.3 mmbbls) vs prev (2.6)
2:00 pm EST US FOMC interest rate decision 0.25% increase to 0.75%-1.00% exp
2:00 pm EST US FOMC projections and dot plot party line has been 3 hikes in 2017
2:30 pm EST FOMC Yellen press conference
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