Busy week with FOMC and ECB meetings as well as UK election

Market movers today

In an otherwise eventful week, today is quite quiet in terms of economic data releases with today's highlight being the Sentix Investor Confidence indicator for the euro area due out at 10:30 CET. Besides that we have the FOMC meeting on Wednesday. After three cuts in a row, we think the Fed will be on hold, as FOMC members have said the current stance of monetary policy is appropriate and the Fed wants to see how things play out, see FOMC preview , 8 December.

The ECB meets on Thursday, which will be Lagarde's debut, and we do not expect any changes. We will look for comments on the ECB's monetary policy strategy review. See our ECB preview , 6 December.

Also on Thursday, the UK is going to the ballot, which will be decisive for what will happen with Brexit. Polling stations close at 23:00 CET when we will also get our exit polls. Our base case is a Conservative majority, which would mean that PM Boris Johnson can get his Brexit deal through Parliament before Christmas such that the UK can leave the EU by 31 January. After that the more complicated negotiations on the future relationship will start.

We are also monitoring closely any comments on the US-China trade talks ahead of the 15 December tariff increases. We still expect a phase 1 deal but apparently there are a few obstacles for the two countries to get over before reaching an agreement (most thought it would have been done last month).

Selected market news

The markets are bracing themselves for a volatile week given the monetary policy meetings in the US and Europe as well as the UK election. On top of this there is the ongoing trade negotiations between the US and China, where the markets are still waiting for a deal.

The Asian equity markets opened up with modest gains on the back of the positive sentiment in the US markets last week. This is driven by the stronger than expected US labour market data released on Friday rather than the uncertainty regarding the trade deal between the US and China. The trade war continues to affect Chinese exports as shown in the data released this morning, where Chinese exports for November declined 1.1% y/y.

The Japanese investor flow data for October showed a modest increase in the holdings of Danish and Swedish bonds. The Danish data is affected by the prepayments in the mortgage market and thus reflects that the Japanese continue to buy Danish mortgage bonds. There was a big sell-off in European bonds, while there was a large purchase of US bonds.

Download The Full Daily FX Market Commentary