EUR/USD nevertheless managed to see a brief visit above the 1.23 mark

Market movers today

• In the euro area, we are due to get the final December HICP inflation figures. We do not expect any revisions but instead will look for which items have weighed on service price inflat ion, as this HICP component will be key for core inflat ion to pick up. Overall, we expect core inflat ion to average only 1.1% in 2018, in line with the ECB's new forecasts.

• In the US, industrial production for December is released. The current trend in industrial production is decent and based on ISM Manufacturing there is room for an uptick in growth of industrial production.

• A few central bank speakers including the ECB's Ewald Nowotny, the Fed's Charles Evans (non-voter, dovish) and Loretta Mester (voter, hawkish) are due to speak today.

• Speech from the Riksbank's Ohlsson this afternoon ; otherwise no Scandi events.

Selected market news

Focus on the prospect of both the ECB and the Fed moving earlier on policy tightening than previously anticipated increasingly weighing on market sentiment. Equities ended the day in ‘red' in t he US and Asia like, and Brent crude oil dipped briefly below USD69/bbl. The US 2Y Treasury yield cont inued to creep higher and again settled above the 2% mark. Euro yields have moved lit t le since the jump on ECB minutes last week, but EUR/USD nevertheless managed to see a brief visit above the 1.23 mark. Meanwhile, the US administration is mulling a short -term spending fix following the breakdown in talks with the democrats.

On Tuesday, an ECB sources Reuters story made a somewhat half -hearted attempt to talk down the mark et's h awk ish take on last week's December meeting minutes, saying that the pledge to keep buying bonds would be kept at the January meet ing, and that a possible change in guidance would rather be one for the March meet ing. ECB communicat ion has been somewhat muddy over the past few days, and the ECB's Jens Weidmann added further to the blurred picture of ECB intent ions by stat ing in a German newspaper interview yesterday that a first hike was more likely to happen in mid-2019 rather than around New Year 2018/19 as suggested by the latest market pricing. There are speeches from Ewald Nowotny today and Benoit Coeuré tomorrow, but we will probably have to wait for Mario Draghi at next week's ECB meet ing to get a real clarificat ion of stance.

Separately, yesterday we changed our call on the Fed and now expect Powell and co to deliver a next hike already at the March meeting (previously June). That said, we do not necessarily expect the Fed to change its communication at the upcoming meet ing on 31 January, as this is one of the small meet ings without updated project ions and a press conference; more important for communication during Q1 will be the individual speeches. Also, we now expect three hikes (previously two) with the second hike likely in June and the third one in December.

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