Daily update
Daily update
- Market attention is focused on the Federal Reserve meeting this week. A rate cut is clearly expected (and long overdue), as inflation pressures continue to fade in the US. However, a rate cut of more than 25bps seems unlikely—while the Fed is late in cutting rates, a larger move might be taken as a sign of panic. Higher frequency cuts rather than larger cuts seem most likely.
- There are no Fed speakers, with the blackout period in operation, but the ECB is trying to fill the vacuum. Chief Economist Lane is among those speaking. While ECB President Lagarde tried to avoid giving signals on future rate cuts, markets are disregarding this reticence and pricing a steady pace of easing.
- The political polarization of the US economy was in evidence on Friday, when Michigan consumer sentiment data rose solely on Democrat optimism. It might be that Democrats are experiencing a different economy from the rest of the US, but it seems more likely that the sentiment is tied to Vice-President Harris’s standing in the opinion polls. Events over the weekend are unlikely to matter to markets, unless they are seen as changing election probabilities.
- New York Empire manufacturing sentiment poll is due, and is as vulnerable to political trends as any other survey.
