Market Movers ahead
- The FOMC meeting is likely to put forward the timing of the first rate hike. We see a close to 50-50% chance of a change to the forward guidance. Overall, we believe the FOMC meeting will mark a hawkish shift in the Fed’s stance.
- The main event in Europe is the results of the ECB’s first auction on its new targeted loans (TLTROs). Our estimate of the take-up (EUR97bn) is not that high. Hence, we do not expect the ECB’s new easing measures to provide a big boost to liquidity yet.
- The Scottish vote for independence (18 September) is set to attract many headlines. We expect the result to be a ‘no’, i.e. no to independence. In the scenario that the result yields a ‘yes’, we expect there to be a significant negative market reaction.
- General elections in Sweden (14 September) could lead to a change of power
Global macro and market themes
- The newly announced ECB measures have not yet convinced the markets about their effectiveness. Periphery bond spreads versus core markets have widened, inflation expectations are not moving higher and the data look bad.
- A low take-up at the first TLTRO might boost fears that these measures are still too little too late and increase the likelihood of QE in government bonds.
- USD/JPY has recently broken the early 2014 high of 105.50 and is now back to 2008 levels. The upside break of the post global financial crisis high is important, both fundamentally and technically, and we see more upside in the pair.
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