esterday’s decision by the Fed has been well received by traders around the world. Stock markets have been soaring overnight with traders taking the liftoff decision and the Fed’s higher GDP forecast as positive signs about the US economy and the prospects for corporate earnings in 2016.
The dot plot of Fed funds forecasts narrowed dramatically, but the midpoint forecast remained steady at 1.4% suggesting that members are still looking at 4 interest rate hikes in 2016. 16 of the 17 members were between 1 and 4 increases with the largest group of 7 members forecasting 3 increases. I’m thinking 3 hikes with the Fed skipping September to stay out of the election campaign. This would take them up to the 1.00-1.25% range which is around the new neutral rate Governor Brainard suggested a few weeks ago.
USD has been climbing overnight sending most paper currencies and gold down about 0.5%. CAD is down a bit less with WTI stabilising near $35.00 again.
NOK has been the top performer on the day rallying after Norges Bank maintained its benchmark rate at 0.75% sending those who had been speculating on a rate cut scrambling to get back on side. This month’s decisions by the Bank of Canada and Norges Bank suggest they prefer at this point to keep their powder dry in case oil prices take another tumble in 2016.
EURGBP has been steady overnight but could be active later in the day depending on what comes out of the summit meeting scheduled to discuss the UK’s reform demands with a Brexit referendum potentially looming next year. PLN could also be active this morning with a number of economic figures due from Poland.
Today’s US trading may be dominated with traders still chewing on yesterday’s FOMC news. There are a few economic reports but they are mostly mid-tier. Natural gas inventories could influence trading in energy commodities as they may give more colour on the effect of El Niño on heating demand this winter.
Shaw Communications agrees to acquire Wind Mobile in a $1.6B deal
FedEx $2.58 vs street $2.50, maintains 2016 yr guidance of $10.40-$10.90
Oracle $0.63 vs street $0.60
Significant announcements released overnight include:
Norway interest rate 0.75% unchanged a 0.25% rate cut had been expected by some
Hong Kong interest rate 0.25% increase to 0.75% to maintain HKD peg against USD
ICYMI yesterday’s Fed decision:
US FOMC interest rate lower bound 0.25% increase to 0.25% expected
US FOMC interest rate upper bound 0.25% increase to 0.50% expected
No dissenters to the decision.
Fed 2016 target midpoints
GDP raised to 2.4% from 2.3% (hawkish)
PCE inflation cut to 1.6% from 1.7% (dovish)
Unemployment rate cut to 4.7% from 4.8% (hawkish)
Fed funds end 2016 neutral at 1.4% (implies 4 0.25% rate hikes in 2016)
Sweden unemployment rate 6.2% vs street 6.6%
Germany IFO bus climate 108 7 vs street 109.0
Germany IFO current 112.8 vs street 113.4
Germany IFO expectations 104.7 vs street 105.0
UK retail sales 5.0% vs street 3.0%
UK retail ex auto and fuel 3.9% vs street 2.2%
UK CBI total orders (7) vs street (10)
Upcoming significant announcements include:
1:00 pm GMT Bank of Poland meeting minutes
1:00 pm GMT Poland industrial output street 5.7%
1:00 pm GMT Poland construction output street (3.9%)
1:00 pm GMT Poland producer prices street (2.0%)
1:00 pm GMT Poland retail sales street 2.2%
8:30 am EST US jobless claims street 275K
8:30 am EST US Philadelphia Fed street 1.0
10:00 am EST US leading index street 0.1%
10:30 am EST US natural gas street (42 BCF)
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