Analysts at Nordea Markets suggest that their macro strategy call remains bearish, and expects global macro indicators to weaken further due to delayed effects from higher rates and a stronger dollar, as well as from tighter global liquidity.
Key Quotes
“There had been some speculation ahead of the Fed meeting that perhaps Powell might give a hint on the balance sheet strategy (which would be positive for global liquidity), since bank reserves risk becoming scarce if the Fed sticks to shrinking its balance sheet by up to 50bn/month during 2019. That the Fed chair said the balance sheet unwind remains on “automatic pilot” means that there will not be much relief for markets insofar as global central bank liquidity is concerned.”
“There will still be somewhat more excess liquidity in the US banking system in the first quarter, owing to effects relating to the debt ceiling which comes into force in March. This might undermine the dollar and provide some temporary relief. Had the Fed indicated it might stop shrinking its balance sheet, it could have been a game-changer. Alas, they did not.”
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