Analysts at ANZ New Zealand Bank explained the key themes in markets.
Key Quotes:
“FORECAST UPDATE:
Owing to momentum across a broad range of US indicators, ANZ Research has revised up its US GDP forecasts to 3.0% y/y for 2018 and 2.3% y/y for 2019. That compares with 2.9% and 2.2% previously.
THE BULLARD RULE?
Fed’s Bullard (who tends to be very dovish) said that he does not think the Fed should raise rates further. He explained his rationale with a modernised Taylor Rule, which incorporates a weaker link between unemployment and inflation and low inflation expectations. In his view, the Fed’s dot plots depict policy well in restrictive territory. Bullard is a voting member on the FOMC next year.
EXTENSION:
GBP was under continued pressure overnight as a result of lingering Brexit uncertainty (and the weak retail sales print). European Commission president Juncker says he thinks a Brexit deal will be reached, but said an extension of the transition period will probably happen to give both sides more time to negotiate. Of course, even once negotiated, it will be difficult selling any agreement politically in the UK. Uncertainty continues.”
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