One thing is for sure: markets are in for a bumpy ride this week as, between the continued trade noise, possible warmongering, month and quarter end rebalancing flow all within a holiday-shortened week, something is bound to go upside down.
Last Friday’s U.S. December employment increased less than expected (+156k vs. +176k), but the markets interpretation in a rebound in wages (+0.4% m/m) suggests a sustained labor market momentum that sets up the domestic economy for stronger growth and further interest rate increases from the Fed in 2017.
Fed minutes released yesterday revealed that apart from a unanimous agreement to raise interest rates for the first time in a decade last month, the committee expressed concerns as to the results of future Trump policies, with a view to maintain a “wait-and-see approach.”
For capital markets, the month of December was dogged by thin holiday trading as global equity indexes marched within striking distances of new records, the dollar ending the year losing some of its shine as dealers closed their books despite global yields floating atop of their year highs.
However, two unexpected major events dominated trading in 2016 –
The Fed did not surprise, they did what was expected of them on the headline, but it’s their foresight that has capital markets wildly gyrating.
The big takeaway from yesterday’s FOMC meeting is the increase in the pace of tightening that’s been signaled for next year. Policy members voted unanimously to raise its target for the fed funds rate up +0.25% to +0.5%- 0.75%.
For corporate treasury teams, it can often be more challenging moving money than managing it when it’s in the register. As part of a new blog series, we will take a closer look at some of the macro events and currencies likely to have the greatest impact on the payments landscape in today’s volatile marketplace.