Tag: Federal Reserve
With today’s employment report adding to the recent string of 200k+ payrolls gains I can’t rule out that the central bank pulls the trigger on tapering already at the 17-18 December meeting, but...
With the Fed far behind the curve, we expect US inflation risks to become much more of a market concern in 2014.
In the aftermath of the strong US payrolls report, the 10Y yield is heading for 3% again, driving also EUR yields higher and leading to steeper curves. We are unlikely to go higher than 3% for now, though the risk of a short-lived bigger sell-off is real. Fed tapering is looming, although not yet in December.
Yesterday’s Q3 GDP report was not strong and certainly not as positive as the headline number indicated, but it still added to the picture of a gradually growing underlying strength in the broader economy.
The FOMC today signalled that tapering of the central bank’s asset purchases is just on hold, and not off.
In tomorrow's FOMC statement the key issue to keep an eye on is the Fed’s forward guidance on its asset purchases for any signs that tapering is off, and not just on hold.
In this note we provide some updated thoughts in Q&A form on the next episodes of the continuing fiscal soap opera in Washington DC.
As has been seen in US politics often in the past few years, Congress came together to raise the debt ceiling at the last minute. However, the damage has been done, political wrangling will continue, and the Fed is likely to delay its tapering plans. The US curve is set to flatten further, while the USD will likely see renewed pressure before long.
Frustration. That was a clear key take-away from a study tour to the US last week. My best guess is that a deal to end the government shutdown will not be reached until close to the 17 October debt ceiling deadline. A total blow-up with a government default seems unlikely, though. In the face of this uncertainty the Fed is likely to delay tapering until its January 2014 FOMC meeting.
The coming days promise yet another fiscal cliff-hanger, with a risk of a government shutdown early next week. Although this is not our baseline scenario, in case markets are freaked out by a government shutdown we could see global markets shifting to risk-off mode.
A few reflections after yesterday’s surprise from the Fed and the implications for our financial forecast.
The Fed unexpectedly refrained from tapering its asset purchases today. Despite the surprise we believe that tapering will start soon. However, the Fed seems likely to wait until the December meeting before making such a decision.
We still expect the FOMC to agree on a modest tapering of its monthly purchases at next week’s highly anticipated meeting but also to provide a stronger commitment to a low fed funds rate for an extended period.
Despite today’s disappointing US employment report we stick to our call that the Fed will opt for tapering its USD 85bn in monthly asset purchases later this month.
The Fed appears on track to slow its bond purchases before the end of this year if the economy continues to improve. But the central bank remains divided over the exact timing of the move. That’s the message from the minutes of the 30-31 July FOMC meeting.
Central banks have become very keen to give concrete forward guidance to markets lately. The Fed has of course been doing it for several years already, but the ECB and the Bank of England started doing it only recently. The …
Today the Fed offered no hint of tapering later this year and its statement took on a slightly more dovish tone on inflation. However, we still expect tapering to begin in September, but it is a closer call.
The fact that the US recovery gained momentum in Q2 despite heavy headwinds suggests the economy could accelerate later this year as the drag from fiscal tightening fades and pent-up demand is released.
The Fed is likely to move one step closer tomorrow to scaling down QE3.
Currently financial markets seem rather complacent about the Fed chairman succession question, but there is a clear risk that speculation on Bernanke’s successor will trigger more market uncertainties in coming months.
Today’s Euro-zone PMI data and the ECB lending survey provided fresh evidence the area is making good progress in finally defeating recession. The data is bad news for bonds in the short term, but any move higher in rates should be seen as a buying opportunity rather than the start of a more permanent uptrend in yields.
The Fed is finally starting to get its message through: tapering does not mean imminent policy tightening. Markets are not that allergic to all tapering talk anymore, while economic data will receive added attention going forward. In the Euro zone, political risks are on the increase again.
Hermostuneisuus vahvistui osakemarkkinoilla sen jälkeen, kun Yhdysvaltain keskuspankki (Fed) signaloi eilen aikovansa vähentää valtionlainojen ostoja. Tämä on ymmärrettävää, koska keskuspankin ostot ovat olleet keskeinen osakemarkkinoita tukeva tekijä. Ei silti ole syytä odottaa, että osakemarkkinat romahtavat ostoja edeltävälle tasolle ostojen loppuessa.
The Fed signalled today that it is on track to begin scaling back its bond purchases later this year if the economy doesn’t disappoint.
Keskuspankit ovat viime vuosina ostaneet valtionlainoja molemmin käsin. Osakkeet ovat näiden ostojen selkeimpiä hyötyjiä. Valtionlainojen korkojen reaktio on taas ollut vähemmän selkeä, vaikka juuri ne ovat olleet suoraan ostojen kohteena.
Inflation is quickly becoming a topic again – not because of concerns the huge stimulus measures pursued by central banks would be creating inflation, but because the falling inflation rates are raising questions of whether central banks are doing enough. Bonds should thrive in an environment of falling inflation.
Attention in global markets is firmed fixed on the Fed, with focus on how and when it will scale down its pace of bond purchases. Potential tapering of the Fed’s QE programme, which has recently boosted market volatility, is likely to remain a dominant theme in the near term, but we see this only as a precursor to increased market focus on the Fed’s eventual exit from its ultra-easy policy stance.
The recent sell-off in interest rates is looking increasingly overblown, especially in Europe. We look for a notable move back lower in rates, with the Fed meeting next week being a potential trigger. Long positions especially in the short end of the EUR curve thus look quite attractive.
Equities have often rallied lately in response to negative economic data releases. Why is that and what does it mean for bonds? How should one be positioned ahead of major data releases like the payrolls report on Friday?
Fed chairman Bernanke's highly expected testimony suggested that the Fed still has little appetite for a slowing of the central bank’s bond purchases. Nevertheless, we still believe tapering could start by the September FOMC meeting.
Going for carry continues to be the name of the game, while the consideration of the credit risks involved seems once again to be a secondary concern. The risks of a bond bubble are no doubt in the air, but this trend has not run its course.
The Fed left policy unchanged as widely expected, but said the pace of QE could be either increased or decreased. This marks a slightly dovish shift from earlier this year.
Despite the recent round of weak data we do not expect an overly dovish tone to the post-meeting statement tomorrow. Still, a potential surprise would be if the FOMC is worried about disinflation.
The reason for our optimism is that private-sector deleveraging, which has been the most important factor holding back the US recovery over the past four years, seems to be over. Very importantly, the US consumer is back as Q4 2012 seems to mark an important economic turning with the end of household deleveraging.
Big market moves have caught a lot of attention in the past few days. Where is the world going?
As expected, the Fed left its policy and forward guidance unchanged at today’s FOMC meeting. Regarding QE3, there was no change in the wording of the statement to signal plans to scale down the Fed’s asset purchases yet. The FOMC's new unemployment projection is still consistent with no hike rate at least until late 2015.
Here are the usual financial forecast slides with our new financial forecasts published this this morning in Economic Outlook. We have changed our forecast for the Fed, the BoE, the SNB, Riksbanken, Euro rates, USD rates, EUR/USD, JPY, GBP, SEK, NOK, oil and the base metals.
Due to the strength of underlying fundamentals in the US economy, an elevated structural level of unemployment and the Fed credibly aiming for higher inflation we expect the US yield curve to continue steepening over the coming year or so as markets price in higher inflation.
With much improved economic fundamentals and significantly diminished policy risks the stage is set for a much stronger US economy in 2013 and 2014, but not without bumps along the road.
Our expectations for next week’s FOMC meeting.
Fed Chairman Bernanke defended today the central bank’s asset purchases and said that they are still merited. With no new policy signals we still believe that the Fed is unlikely to scale down QE3 over the next few months.
I put the odds of the full sequester spending cuts going through on 1 March at more than 50%. Moreover, I expect most of the cuts to be sticking. I expect such an outcome to be slightly negative for risky assets and slightly positive for US Treasuries and the USD.
Yesterday’s Fed minutes showed a central bank increasingly divided about the future of asset purchases, even though most participants found the purchases effective in easing financial conditions and helping stimulate economic activity. Still, the Fed clearly wants to be careful not to start removing accommodation too soon or too fast.
Today’s FOMC meeting was a non-event, leaving monetary policy and the forward guidance unchanged as widely expected.
In this week’s edition we reiterate our 2013 views while we also comment on the most recent development in FX and fixed income markets.
While we don’t expect any rate hikes in many years ahead, it would be foolish to rule out the possibility of Fed ending its asset purchases as soon as in 2013. The December minutes revealed that there are several members who actually want to end or reduce the purchases during 2013, and if that will happen, we expect the US long end to underperform substantially.
The Basel Committee on Banking Supervision announced yesterday it had agreed to considerably loosen its new liquidity requirements. The relaxation of the rules illustrates the regulators are not particularly willing to risk another big hit to the economy due to heavy regulation.
US jobs data highlight why we are increasingly sceptical of the Fed’s indications that it will keep the funds rate near zero for at least 2½ more years.
In our view the US economy is approaching full capacity at a faster pace than currently anticipated by the Fed. We are therefore increasingly sceptical of the Fed’s indications that it will keep the funds rate near zero for almost three more years.
In this week´s edition of G10 Weekly we take a look at the recent move by the Fed, and present a Riksbank preview ahead of next week´s rate decision.
The Fed’s new rate guidance could easily lead to big market swings going forward. Thus, linking future policy more closely to incoming data risks introducing substantial volatility into broader financial conditions, hurting confidence among consumers and businesses.
The Fed extends its asset purchases into 2013 and adopts unprecedented numerical thresholds to convey how long it expects to leave short rates at near-zero.
I remain long-term bullish on the USD. Any near-term headwind to the USD due to improved risk sentiment when the risk related to Greece and Spain is removed should be seen as a USD buying opportunity.
With an unchanged balance of power after the US elections more cautious investor behaviour due to policy uncertainty seems likely going into year-end. Focus now turns to how policymakers will handle the fiscal cliff issue in the lame-duck session.
Ahead of tomorrow’s presidential and congressional elections some updated thoughts on the potential market implications, in Q&A form.
The two-day FOMC meeting that ended today was a non-event for markets, as widely expected. Focus is now on the next meeting on 11-12 December.
Nordea Economic and Market Outlook: Our latest take on Nordic and Global financial markets and economies.
Focus on Euro-zone problems continue. We don't expect economic key figures to surprise on the upside. Risk on/risk off to ebb and flow and we're keeping our forecasts mostly unchanged.
More details from the ECB on OMT, September employment report and ISM manufacturing survey from the US, minutes of the FOMC meeting, UK PMI figures and the Bank of England rate decision.
The very moment when financial markets realize that the marginal return of additional QE gradually approaches zero will coincide with a severe risk off environment. We expect this moment to appear sooner rather than later.
The likely meagre benefits of the Fed’s new easing effort risk being outweighed by potentially significant costs in the longer run. The potential costs include not only the loss of the Fed’s credibility but also economic instability.
After a week of consolidation, the outcome of the confidence game is in Spain's hands...
Previous bond purchase programmes by the Fed have led to a rather quick rise in yields. This time there are a number of factors arguing that history will not repeat itself. As a result, any rise in yields is likely to be very gradual for now.
Last week’s surprisingly weak employment report probably tipped the scales in favour of a third round of large-scale asset purchases (QE3) when policy makers meet later this week.
QE3 from Fed and Wild Wednesday in the Euro area next week
Tomorrow’s employment report might make or break not only President Obama but also the Fed’s QE3.
Although the US economy lost momentum in Q2 the recovery is expected to continue the next few years, but at a moderate pace. However, US fiscal challenges around the end of this year imply significant risks to the outlook.
Today’s set of data was clearly on the soft side, supporting those who believe that the Fed will launch QE3 at next week's meeting.
In his speech at Jackson Hole, Bernanke provided no new information of the form or timing of any additonal easing.
Will the ECB deliver? Hopes are high but expect somewhat of a disappointment as they won't reveal all.
Three US fiscal issues pose a threat to the US economic outlook. In this research note, I have tried to list a few scenarios of how the looming and potentially damaging US fiscal drama could play out.
An extension of the Fed's forward guidancce of low rates into 2015, but no QE3, is a likely outcome of the next FOMC meeting in September, in my view.
We are lifting our short-term interest rate forecasts but keeping the 2013 forecasts. We’re in the midst of updating our macro forecasts and will introduce 2014 financial forecasts in a fortnight.
Next week’s macroeconomic releases and events are, in our view, generally likely to give further support to risk appetite in financial markets.
A mixed US employment report suggests the economy is not weak enough to prompt the Fed to launch QE3 in September.
The Fed on Wednesday left policy unchanged but strengthened its easing bias. No change to its forward guidance for low rates is likely to disappoint markets in the near term.
Today's ISM manufacturing survey was not weak enough to trigger QE3 from the Fed later today.
Markets might get disappointed by the Fed tomorrow as the central bank, in my view, is unlikely to launch another asset purchase programme (QE3) despite economic weakness.
It seems the Fed needs more weak data, before it will provide additional stimulus. Our baseline scenario sees US economic data picking up later this year, in which case the Fed could stick with Operation Twist. Still, in the short run, weak data may continue, supporting further easing.
Recent data implies that growth in US consumer spending has weakened, whereas underlying retail sales grew by close to 6%. In light of the weak data, dovish comments will likely be heard from Bernanke tomorrow.
Weak data would likely need to continue for the Fed to embark on new stimulus measures in the short term, and our baseline remains that US data will start to improve again soon. But, in light of yesterday’s minutes, the Fed remains prepared to act.
We have updated our financial forecasts. We are keeping our outlook basically unchanged, expecting choppy trading over summer.
2012 is likely to resemble the past two years: US economic data will start to generally surprise on the positive side in the autumn.
June’s US ISM manufacturing survey is clearly a negative for investor confidence, although expectations of more easing from the Fed (QE3) are likely to increase.
After all eyes being in Euro-zone events lately, next week’s heavy US data certainly has potential to catch the attention again.
I believe there are good reasons to expect a rebound in US activity in late summer or early autumn. If this prediction proves right, we should see an improvement of risk appetite in financial markets before long.
We have made minor adjustments to our financial forecasts. The storyline is more or less unchanged.
The Fed gave a nod to the slowing US economy today, extending its Operation Twist through the end of 2012. However, the extension is likely to have very little impact on the wider economy and overall risk sentiment in financial markets.
One should not expect any major risk rallies or bond sell-offs on the back of the Greek elections, we already saw notable corrections in markets ahead of the elections.
The Fed is likely to provide more monetary easing at the upcoming FOMC meeting with a short extension of its Operation Twist. The outcome of the pivotal Greek election on Sunday could also have a further effect.
Most of next week will most likely be spent digesting the Greek elections results and (the chance of) possible stimulus measures, and few interesting entries in the calendar.
Greek elections and contagion risks still the major story. We are keeping our forecasts basically unchanged.
While Fed chairman Bernanke offered few hints that further monetary stimulus is imminent, the Fed seems to be leaning more towards an extension of Operation Twist rather than pure QE at the 19-20 June FOMC meeting.
Today’s weak US employment report solidifies at least one of the pre-conditions for more monetary policy easing from the Fed.
An increasingly clear picture is emerging of a US economy that has gained momentum and is slowly heading for a selfsustaining upswing, while Europe seems to be sliding into a deeper crisis than previously anticipated.
We expect US economic data to continue to come in on the weak side, putting renewed pressure on risk appetitive and continuing to support the safest assets.
All eyes remain on anecdotal news on how depositors in Greece and outside the country are reacting to the recent events. In terms of economic data releases, the main focus will be on flash PMIs for May.
Fed chairman Bernanke may effectively already be a lame duck as he is likely to step down in early 2014 and his dovish views appear to be increasingly isolated within the organisation. This could be a huge issue going forward.
The Greek situation will continue to grab the headlines. Euro-zone Q1 GDP will likely confirm the zone has fallen into another recession, while US April retail sales growth likely weakened notably compared to March.
Probably the most important debate on US monetary policy is whether there really is an aggregate demand shortfall, and as a result, a negative output gap. If the answer is yes, then the Fed should continue supporting the economy. If the answer is no, monetary policy should soon be tightened.
Our latest take on Nordic and Global financial markets and economies.
While QE3 is still expected to be announced in June, too little Fed tightening is priced in longer out.
Following recent evidence of slower US growth, the April ISM manufacturing survey was a pleasant surprise.
At 2.2% US GDP growth was probably only slightly weaker than the Fed’s expectations for Q1. However, I believe the Fed’s growth forecast will be challenged more in Q2.
Bond markets appear due for a correction, but we expect next week’s events and economic data only to add to the gloomy sentiment.
Federal Reserve chairman Bernanke said Wednesday that further bond purchases by the Fed remain “very much on the table”, if the economy needs further support. But it will require weak economic data for QE3 to be announced in June. And this is what I still expect to see.
At this week’s two-day FOMC meeting that concludes on Wednesday, the Fed will signal no change in the current policy stance. The Fed’s no to QE3 risks triggering a further sell-off in risky assets and a stronger USD.
The big central banks have turned out to be much less inclined to QE than expected. We no longer expect QE from the Bank of England in May.
Next week’s calendar looks quite interesting, with the main focus in the US on the 2-day Fed meeting concluding on Wednesday.
We see rates continuing lower in the coming months and the EUR/USD unchanged around the current levels.
We see rates continuing lower in the coming months and the EUR/USD unchanged around the current levels.
Although Fed officials continue to signal no imminent QE, I still expect QE3 to be announced in June.
The huge liquidity sloshing around is boosting the safest asset classes again, while Spanish and Italian bonds remain under pressure. This is likely to continue, until we see some better economic data again.
Yesterday's Fed minutes sent a signal that the central bank is not tilted towards more quantitative easing any more. Such a message opens more room for espcially longer US Treasury yields to rise from current levels.
The recent sell-off in bonds has shown little signs of abating. One only needs to look back to the past couple of years to see that yields can see a substantial jump without major changes in central bank policy.
Pari viikkoa sitten USA:n keskuspankki Fed kertoi aikovansa pitää korot alhaisina vuoteen 2014 asti. Perjantaina julkaistut USA:n työttömyysluvut herättävät kuitenkin kysymyksen siitä, voiko USA:n keskuspankki todellakin odottaa näin kauan.
Today's fresh data from the US labour market in December certainly shows an economy that has picked up steam in the second half of 2011.
The continuous downgrade of strong rated issuers is making high quality collateral a scarce resource.
Taking the temperature of the cross currency basis swap market following the coordinated central bank actions to ease money market tensions.
Central bank rescue to help only gradually. The past couple of months have clearly brought a turn for the worse in two respects.
Slowing growth is increasingly putting downward pressure on asset prices and bond yields.