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Keep Watch on OPEC Meeting Despite All the Talking Fed Heads

Monday, 30 November 2015 06:01 PM Current | Bio | Archive

As the next FOMC statement is only 16 days away, this week most of our attention will be captured by the ECB Governing Council meeting’s decision on Thursday.

That is when we will learn by how much more the European Central Bank could ease further (probably) and eventually expand and extend the projected amount of its bond-buying program and by how much it could cut further the ECB deposit facility rate that already stands at minus -0.20 percent.

As many investors have interests in the movements of the euro and of course the dollar it could be wise to be on watch, especially in case the quarterly “Eurosystem/ECB staff macroeconomic projections for the euro area” that come out this week, and in case they should come in better than expected, if that should be the case, we could have a less dovish ECB statement/decision on Thursday, which could cause a serious upswing in volatility in the markets.

Again, these chances are rather slim, but cannot be discarded as the overall picture of the macro data for the Euro area has undeniably “improved” since the ECB has launched its QE program in Q1 of this year.

Question is, if better data would be enough to restrain Mario Draghi from his clearly signaled intentions of further easing.

Markets seem so far to have priced in a further 0.10 percent cut of the ECB deposit facility rate to negative -0.30 percent, which is very well reflected in the euro/dollar pair price that now quotes around its lowest level since December 2014 at about $1.058 per euro, which represents a decline of about 15 percent against the dollar.

No doubt, that's welcome news for the ECB.

As far as the U.S. Treasury is concerned, it’s  still too early before a further strengthening dollar starts really causing "sustainable" damage to the U.S. economy.

Please take care, the day that happens, and, at least in my opinion, that day is in the cards, it could become interesting to take part, not all, of dollar strength related profits off the table. Of course, we aren’t there yet …

Besides that, on Friday we’ll have the all-important job situation numbers for the month of November, which are not expected to fall off the table and therefore should not prevent the Fed starting its long way to normalization on December 16.

Anyway, we can be hopeful for learning a little bit more this week about what the Fed’s intentions are as this week we’ll have no less than 10 Fed Speakers who are all FOMC voting members and who are all scheduled to speak at various events.

It all starts on Tuesday with Charles Evans of the Chicago Fed, known as a “dove,” who will speak on “current economic conditions and monetary policy.”

On Wednesday, there will be Fed Chair Janet Yellen, known as dovish, who will speak before the Economic Club of Washington in Washington, D.C. There will also be Dennis Lockhart of the Atlanta Fed, known as a centrist, who will speak in Fort Lauderdale, Florida; Fed Governor Daniel Tarullo, known as dovish, who is announced to give a speech and San Francisco Fed John Williams, known as a centrist, who will speak on the “outlook.”  

On Thursday, there will be Yellen again who will testify before the Joint Economic Committee in Washington and Cleveland Fed Loretta Mester, known as hawkish, who will speak at the Cleveland Fed financial stability conference in Washington together, at the same event, with Fed Vice-Chair Stanley Fischer, known as a centrist who will speak on “Financial Stability: Policy Analysis and Data Needs.”

On Friday, there will be Philadelphia Fed Patrick Harker, known as hawkish, who will speak at the Philadelphia Fed policy forum; St. Louis Fed James Bullard, known as hawkish, who will speak at the same event and finally Minneapolis Fed Narayana Kocherlakota, known as a dove, who will also speak at the same event about on “Monetary Policy Renormalization.”

Let’s hope we all become a little bit wiser this week.

Finally and also on Friday we’ll have the annual OPEC meeting in Vienna, Austria, where its members continue growing further apart from each other and where a production cut decision is unlikely notwithstanding Saudi Arabia will be formally asked to cut its production.

Investors could do well paying attention because and in case that should happen, that by itself would be much more powerful than whatever the ECB could decide on Thursday.

Yes, interesting days ahead.

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Monday, 30 November 2015 06:01 PM
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