In the final week ahead of Christmas, focus remains on markets digesting last week's slightly hawkish Fed message amid most global economic surprise indices reaching new highs and US-China tensions rising. Wednesday's FOMC minutes will shed more light on the board discussions about the 2017 outlook. which will be held against this week's bunch of US data releases including market Service PMI (see below), capital goods orders, personal spending, Q3 GDP (third release) and PCE inflation.
In the US, the preliminary Markit Service PMI for December is due today. We estimate the index moved slightly higher to 55.0 in December, from 54.7 in November, indicating solid Q4 growth. Tonight, Fed Chair Janet Yellen will hold a speech at a university commencement, which will attract market attention even if the setting is unusual for any market shifting comments.
In the euro area, German Ifo expectations are scheduled for release. German survey indicators including the IFO expectations have signalled strong GDP growth in Q4 16. The tendency continued with last week's German ZEW figures, where the current situation figure was the highest since September 2015, while the expectation component remained at 13.8. Thus, we expect a solid Ifo figure in December to mirror growth expectations.
There are no important Scandi releases today. The big Scandi event of the week will be the Riksbank meeting on Wednesday, constituting the final G10 monetary policy meeting of the year. We expect the Riksbank to prolong the current QE programme by six months (SEK30bn) and cut the repo rate by an additional 10bp to -0.60%. While the prolongation of QE is relatively widely accepted, the view on an additional rate cut is non-consensus.
To read the entire report Please click on the pdf File Below