Fed, BoE and BoJ in focus this week

According to analysts at Rabobank, the Fed, the BoE and the BoJ are likely to be the key events this week as they all will hold their monetary policy meetings in the last proper week of trading in a volatile 2018.

Key Quotes

“With the December rate hike of 25bp fully priced in, the market’s attention has shifted to the Fed’s policy path in 2019. The new FOMC projections are likely to reflect the deterioration in economic data and market sentiment that didn’t go unnoticed by various Fed speakers. If the FOMC participants will remove only one of the three hikes for 2019, that would still leave the dot plot with one more hike than markets are currently expecting for next year. Philip anticipates just one hike next year in March. He also expects expect the yield curve to invert after that hike, signalling a recession in 2020, and ending the hiking cycle altogether.”

“As for Brexit, PM May is under growing pressure from with her own cabinet to consider all available options, including a second referendum, to solve the political impasse caused by lack of support in parliament for her Withdrawal Agreement accompanied by persistent reluctance from other European leaders to offer much stronger assurances regarding the Irish border backstop. That said, May is expected to say that a second vote would be a catastrophic breach of trust. A firm rejection by May to even contemplate another referendum would leave sterling vulnerable amid rising market concerns that the UK is on the path that leads to a hard Brexit.”

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