March 11, 2017 (Commerzbank AG) – How much will the Fed tighten the reins?
The Fed is expected to hike interest rates next week – something virtually no-one envisaged at the start of the year, even though the central bank did hint in December at three moves in 2017. Since, in contrast with earlier years, the US economy seems set to proceed largely as the Fed expects this year, we expect the bank to stick to its timetable. Consequently, we envisage three rate hikes each in 2017 and 2018, somewhat more than the market is currently expecting.
Netherlands: no nail-biting affair for the euro
Next Wednesday, the Dutch electorate goes to the polls. Whilst the PVV of eurosceptic Geert Wilders should do better than in autumn 2012, it is unlikely to become part of the government.
Outlook for the week of 13 March to 17 March 2017
- Economic data: The “hard” US economic data due out next week will once again probably not be able to keep pace with the recent strong rise in survey-based indicators.
- Bond market: Despite a number of favourable trends, 10-yerar Bund yields are likely to trade fairly soft in the week ahead.
- FX market: The FX market is in for a busy week: Besides a number of central bank decisions, the parliamentary elections in the Netherlands and the meeting of G20 finance ministers are on the agenda.
- Equity market: Eight years ago the current DAX bull market started, and we look for continued gains into a ninth year, if not quite at the same pace as of late.
- Commodity market: We do not expect the recent weakness of oil prices to portend a sharper decline, although we look for weakness to persist in the medium-term.