Daily Commentary BY THE CURVE TEAM –

Markets Jump at Headlines Ahead of FOMC

12th of December, 2017

It was an interesting start to Fed week. There was little in the way of data to give the market a general sense of direction. That didn’t mean markets were rudderless with a number of interesting headlines driving individual moves.

Yesterday’s announcement of a new head of the RBNZ, Adrian Orr, got the market a little excited and say the NZD post solid gains across the board. Orr is currently the head of the NZ Super Fund and is actually a former Deputy. The market clearly sees him as a hawk given the NZD performance over the past 24 hours.

Oil was another big mover overnight after an announcement that a key North Sea pipeline that usually carries up to 400,000 bpd will be offline for some time to fix cracks that have opened up. The news saw oil trade back up to recent highs and could precipitate a move higher. The price of oil is a key factor in overall inflation so any break higher warrants close watching.

Meanwhile in the UK the Brexit negotiations seem to be getting the wobbles. You can read the various headlines as there are so many reports doing the rounds, but essentially confidence in the process is waning. This has seen Gilts bid and the Sterling under pressure. This is also something worth watching in the weeks and months ahead.

If you want to know what I think are the two key themes to watch in the year ahead, check out today’s Curve Monthly Insights that will be released at 2:30pm this afternoon. I also take a look at what these key trends could mean for monetary policy in 2018.

David Flanagan

Director - Interest Rate Markets