Article / 02 November 2017 at 8:00 GMT

Morning Markets: A new boss at the Fed and higher rates for the UK

Senior Editor / Saxo Bank
Denmark


 

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Watchlist

  • Australia: Building approvals (already released)
  • Australia: Trade balance (already released)
  • Germany: Manufacturing PMI (0855 GMT)
  • Germany: Unemployment (0900 GMT)
  • Eurozone: Manufacturing PMI (0900 GMT)
  • UK: Interest rate decision (1200 GMT)
  • US: Jobless claims (1230 GMT)


Central banks lead today’s agenda with US president Donald Trump due to announce his nominee for the Federal Reserve chair while the Bank of England is expected to unleash its first interest rate hike in a decade. The Trump announcement, which various media reports say will come at 19:00 GMT, should see Jerome “Jay” Powell confirmed as the replacement for Janet Yellen, who has served since 2014. Powell, the more dovish of the frontrunners for the position, is said to favour a gradual pace of policy adjustment as well as deregulation.

In the UK, meanwhile, BoE governor Mark Carney is expected to add 25 basis points to interest rates in a move that reverses an emergency cut in August of last year in the immediate aftermath of the Brexit decision. The move is designed to rein in an inflation rate, which, at almost 3%, is uncomfortably above the central bank's target 2% maximum threshold.

Both the Fed nomination and the UK policy move have been widely flagged in recent weeks and are therefore largely priced in by markets. So in terms of fresh directional impulse, markets will have little to grasp besides a Eurozone PMI update at 09:00 GMT, US ADP jobless claims at 12:30 and beyond that, anticipation of tomorrow’s US nonfarm payrolls.

Market signals

Asian session

  • Asian markets were in the red in late trade after an upbeat morning
  • The ASX200 closed 0.1% lower at 5931
  • Japan's consumer confidence improved in October to the highest level in over four years
  • Donald Trump will announce his Fed chair nominee today
  • Trump starts an 11-day trip to Asia, his first as president
  • Markets have priced in a 90% probability that the BoE will hike rates today
  • Shares in the Japanese music and electronics giant Sony soared 11.44% on Wednesday
  • Upbeat earnings from Sony and other corporations are driving up the Nikkei 225
  • Oil prices held steady as US crude inventories fell despite a rise in production
  • Australian building approvals rose 1.5% in September, or 0.2% in annual terms
  • Australia's trade surplus soared to $A1.75bn in September, up from $A873mln in August

Forex ahead

  • The USD firmed after the Fed statement signalled a rate hike this year
  • If the BoE fails to hike rates or sounds less dovish than expected, it will impact the GBP
  • Upbeat trade data drove the Aussie dollar temporarily above 0.77

From the Floor

Beyond Powell. “We don’t really know what this Fed is going to look like,” says Hardy

Battery issues. “Tesla’s cash burn is really excessive,” says Garnry

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Explorers buoyant
Buoyant crude oil prices have supported shares in listed energy firms in both Australia and the US, says the Sydney-based team at Saxo Capital Markets Australia.

Treading water
Asian shares were treading water in early trade today, possibly awaiting confirmation of Trump's Federal Reserve chair appointee, says the team at Saxo APAC Sales Trading.


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 The Bank of England is set to raise rates today, more than 10 years and 4 months
after its last hike. Photo: Shutterstock

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