Market movers today

  • The main event will be the FOMC statement tonight. There will be no press conference or new projections, so focus will be on the tone of the statement. We expect only small changes to the statement and most importantly we expect it to repeat that the FOMC can ‘be patient in beginning to normalise the stance of monetary policy’. At the December press conference, Yellen explained that patient is consistent with the Fed staying on hold for at least the coming two meetings. This would in effect rule out hikes at the March and April FOMC meetings. We expect no major market reaction to the statement. More important will be the signals in upcoming Fed speeches and not least the Employment Cost Index for Q4 released on Friday, which will give more input to whether wage growth is as subdued as indicated by the recent employment report.
  • Otherwise the data calendar is quite thin. Only indicators of interest will be German and French consumer confidence this morning. Consumer confidence in euro-area countries have ticked higher again recently following a moderation during most of 2014.

  • The Ukraine crisis has escalated again recently and may get increasing focus in markets if new sanctions come on the table.

  • In Denmark and Norway unemployment rates are due and from Norway we will also get industrial confidence data.


Selected market news

The series of US data released yesterday was a very mixed bag: while house prices rose in line with expectations and US conference board’s measure of consumer confidence surprised on the upside, rising to the highest level since summer 2007 at 102.9 (Danske Bank 97, consensus 95.5), notably US durable goods orders were weak. Core capex orders declined 0.6% m/m in December and November was revised down to -0.6% m/m from 0.0%, suggesting very weak business investments in the US around -4% annualised in Q4. This suggests downside risk to our Q4 GDP forecast, which is now tracking closer to 2.9% than 3.4%. Especially the negative implication for growth stemming from the unexpected decline in durable goods orders weighed on investors’ risk appetite and US equities followed the track of the European markets and ended the day lower.

In Asia this morning sentiment has improved as Singapore’s central bank unexpectedly eased its monetary policy. The Monetary Authority of Singapore uses the currency as its main policy tool and said in an unscheduled statement that it will seek a slower pace of appreciation in its local currency. The Singapore dollar declined to the weakest level since 2010 against the US dollar at 1.3520 following the announcement.

Australian core inflation rose more than expected in Q4 with an increase of 0.7% from the previous quarter. The higher-than-expected core inflation data have reduced expectations that the Reserve Bank of Australia (RBA) will cut interest rates at its monetary policy meeting next week, while AUD/USD has increased more than 1% to around the 0.80 level. We still expect the RBA to cut the cash rate target in March and target AUD/USD at 0.78 in 12 months’ time.

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