The biggest event of the coming week is surely the FOMC announcement on Wednesday, when as most expect, will see the Fed’s language shifting from “considerable time” to “patient.” But while “most” also expect this to be the preamble toward Fed hiking rates in mid-2015, some disagree.
According to DB’s Jim Reid, “the Fed want to be more hawkish regardless of any market volatility that we’re seeing at the moment and any such actions might cause. When push comes to shove we don’t think they’ll find it very easy to raise rates in 2015 but they certainly might give markets a few frights first in signaling it. We’ll know more about this on Wednesday as the all important FOMC meeting draws to a conclusion. Will Mrs Yellen drop “considerable time”? Will they base their thoughts on the +321k payroll print 10 days ago or the fact that the S&P 500 had its worst week in more than two years last week with the Oil sector causing problems in equities and worse problems in credit markets? Also 5yr5yr forward breakeven inflation has fallen 20bps since October and grabbed a lot of attention last week. So a lot to throw in the mix. If the Fed are hawkish this week then we know they are serious about normalising rates, even in the face of challenging market conditions and worries about low inflation. If dovish then we know they are only going to raise rates early if all the stars are aligned. So an important meeting for understanding how they’ll behave next year.”
So clearly this week’s key event is whether or not Mr. Chairmanwoman will finally signal the break away from the graviational pull of ZIRP, or if, as has been the case for the past 6 years, she will “get to work.”
Here is what else to expect via BofA:
And some more details from DB:
- Looking at the week ahead and away from the FOMC meeting we are off to a quiet start in Europe this morning with no significant releases although we do have the NY Fed Empire survey (Dec), industrial production (Nov) and the latest NAHB housing market index to look forward to.
- On Tuesday we have the latest flash HSBC manufacturing PMI from China which will likely be a source of headlines when we print the EMR tomorrow morning. Tuesday also sees flash services and manufacturing PMI’s for the Euro-area, France and Germany, the German ZEW survey, UK inflation stats, and housing starts/building permits from the US.
- On Wednesday we have the latest BoE minutes from the UK, final HICP prints for the euro area and CPI updates from the US although Greece will be one of the key macro focus for markets. The first of three possible parliamentary votes to elect Greece’s new President will take place this Wednesday 7pm local time (Kathimerini).
- On Thursday China will release the latest property price performance for November whilst German IFO, the US weekly jobless claims, and the Philly Fed survey are the other notable releases.
- Friday morning’s BoJ statement will be of some interest on top of the sentiment/confidence readings in Germany and France.
via Zero Hedge http://ift.tt/136gJXM Tyler Durden