The account of the ECB meeting in December is due to be released

Danske Research Team Danske Bank A/S

Market movers today

In the US, the ADP employment and initial jobless claim figures will attract some attention ahead of the important December jobs report, which is due out tomorrow. Moreover, the ISM non-manufacturing index is set to be released, and we expect this to show a continuation of the strong growth signals. However, as the index jumped to 57.2 in November, while the Markit PMI service index stayed more or less unchanged, we see a downside risk to the ISM non-manufacturing index in December due to volatility, and estimate the index declined to 55.9, which is still solid.
In the euro area, the account of the ECB meeting in December is due to be released. Focus will be on the discussion related to the changes to the parameters of the asset-purchasing programme, especially regarding the change that allows the ECB to purchase bonds that yield below the -0.4% deposit rate. As it remains uncertain how ‘aggressive’ the ECB will be in terms of buying below the deposit rate, market participants will look for an answer to this.
In the UK, the PMI service for December is due and we think risk is skewed towards a fall in PMI services due to lower services confidence. We look for a fall from 55.2 to 54.2, which still indicates solid growth in the service sector. Overall, PMIs should continue to signal solid Q4 growth and that the economy is still quite resilient to Brexit uncertainty. That said, we expect GDP growth to slow but stay positive this year. See Research UK: 'Brexit' uncertainty set to prevail in coming years, 4 January 2017, for more details on the outlook for the UK economy.
Statistics Denmark is due to publish housing prices for October and bankruptcies, repossessions and unemployment data for November.

Selected market news

Minutes from the December FOMC meeting released last night showed that the FOMC members think the economic outlook is very 'uncertain' until we get more information about Presidentelect Donald Trump's actual economic policy. 'Almost all' FOMC members think there are upside risks to their growth forecasts due to the likely fiscal boost, which they have not fully taken into account. Given the Fed's focus on 'Trumponomics', any comments or tweets from Donald Trump on economic policy will be followed closely. We stick to our view that the Fed will hike twice this year (June and December) but believe the risk is skewed towards three hikes. We believe the Fed is likely to increase the hiking pace in 2018 (late 2017 at the earliest), and we have changed our call for 2018 and now expect the Fed to hike three or four times in 2018 rather than twice as we forecast previously. For more details, see see FOMC Minutes: Fed is waiting for more information on 'Trumponomics', 4 January 2017.

Price actions were little affected by the FOMC Minutes last night in the US session. The SP500 index booked a 0.6% gain, while yields on 10Y US Treasuries moved 2bp lower. In the FX market, EUR/USD inched higher overnight and at the time of writing, the cross has broken above 1.0550. In Asia this morning, trading has been mixed, with Japanese equity indices trading lower driven by a weaker USD.

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Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

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