Focus may now turn to the ECB

Allan von Mehren Danske Bank A/S

Market movers today

Markets will continue to digest the FOMC meeting yesterday,
In the Scandi market s, t oday's key event is the Norges Bank meeting, where we share the consensus view that Norges Bank will not touch interest rates. The minutes from the Riksbank's September meeting are also due out (see page 2).
In the euro area, consumer confidence data for September is due out . Wage growth has started to pick up in Q2, but as inflation has also increased since 2016, real wage growth remains low and could act as a drag on consumer confidence. We expect a small decrease in confidence to -1.6 in September.
In the US, the Fed Philly index for September is due to be released, which we expect to fall somewhat given the extremely large gap between ISM manufacturing and Markit PMI manufacturing. The numbers may be somewhat af fected by the recent hurricanes although it remains our base case that any impact should be short -lived.
ECB president Mario Draghi is also due to speak in Frankfurt this afternoon.

Selected market news

The FOMC statement yesterday came out on the hawkish side compared to market pricing with the Fed still projecting another hike this year and three more hikes next year. It compared with a market that was pricing in less than two hikes by the end of 2018 ahead of the meeting. The message from the Fed pushed bond yields up and sent EUR/USD below 1.19. Equity markets initially sold off but recouped the losses and finished broadly flat . Asian markets are mostly higher but the S&P future is treading water in overnight trading. The Fed's projection is broadly in line with our own expectations as we see a continually tightening labour market as keeping the Fed on the path of very gradual rate hikes.

Focus may now turn to the ECB with a long list of speeches in coming days from ECB members, see Bloomberg. The markets will be looking for clues on what to expect at the important 26 October meeting, when the ECB has stated it will give more clear signals on its exit strategy.

Otherwise, the next thing up is the German election on Sunday, although German Chancellor Angela Merkel is widely expected to win. While she has lost some ground recent ly, the polls still point very much to another term for her.

The Bank of Japan kept monetary policy unchanged this morning but a dovish new member dissented the decision. However, this was widely expected. The JPY did not move on the announcement.

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Author

Allan von Mehren

Danske Bank A/S

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