Week Ahead: Slower Rate Hikes Eyed as Fed, ECB, BoE and SNB Clash
XM Group | Dec 09, 2022 08:56AM ET
The elusive wait for the Fed pivot
The Federal Open Market Committee (FOMC) will conclude its last meeting of the year on Wednesday and once again, markets seem to have fallen into the usual trap of expecting some kind of a dovish pivot in the run up to the event. To be fair, there is slightly more realism among equity traders this time round and it is FX and bond markets that appear at most odds with the Fed’s messaging.
With the pound having established a floor at the $1.21 mark over the past week, that support may come under attack if the incoming data underscore the pessimism surrounding the UK outlook. However, as long as the dollar stays on the backfoot, the pound might still be able to maintain its uptrend. This would even more so be the case if next week’s policy announcements put the Fed and BoE on diverging paths.
An overload of major data
Elsewhere, Australian employment figures will be important for the aussie on Thursday, while the kiwi will be hoping for some direction from New Zealand’s third quarter GDP print the same day.
In Japan, it’s a packed week of economic releases, with the Bank of Japan’s quarterly Tankan business survey likely attracting the most attention on Wednesday, although the flash PMIs on Friday will be vital too. Whilst none of the data may be very market moving, they will help form an overall picture of the Japanese economy as the BoJ considers whether to start preparations for an eventual exit out of ultra-accommodative policy.
But in the meantime, the yen will be taking its cues from Fed policy as well as broader risk sentiment, which Chinese monthly indicators due Thursday will be contributing to.
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