Market Comment | Calm markets ahead of today’s FOMC and tomorrow’s ECB meetings

  • Cautious mood in financial markets ahead of today’s FOMC meeting, at which it is widely expected that the Fed will raise interest rates for the second time this year. However, markets will be focused on Powell’s language and communication, a key hint to the future path of rates within 2018. Markets are currently assigning a 25% probability to their being two additional rate hikes, apart from today’s.
  • In this context, the US 10Y Treasury remained unchanged, while equity indices showed a positive performance, driven by the Nasdaq, which opened at a fresh record high, favoured by the very low volatility environment (VIX at 12%).
  • European assets were also little changed: the 10Y Bund yield fell slightly to below 0.5% ahead of tomorrow’s ECB meeting, at which we expect changes in forward guidance hinting at the end of QE as easing financial conditions pave the way for the exit. The worse-than-expected industrial production data for the EZ. had a muted effect on equity indices, while peripheral risk premia narrowed slightly.
  • The weak USD and steady crude oil prices (around $75 per barrel) favoured the performance of EM currencies, which appreciated across the board despite today’s likely interest rate hike by the US Federal Reserve, which is already priced by financial markets. The main exception was the Turkish lira, suffering due to idiosyncratic vulnerabilities.

En ningún caso BBVA será responsable de las pérdidas, daños o perjuicios de cualquier tipo que surjan por acceder y usar el website, incluyéndose, pero no limitándose, a los producidos en los sistemas informáticos o los provocados por la introducción de virus y/o ataques informáticos. BBVA tampoco será responsable de los daños que pudieran sufrir los usuarios por un uso inadecuado de este website y, en modo alguno, de las caídas, interrupciones, ausencia o defecto en las telecomunicaciones.