Market movers ahead
In the US , minutes from the December FOMC meeting are due to be released at the beginning of the new year and will be analysed closely for the future rate hike cycle. The US jobs report for December (due 8 January) is expected to show that the labour market continues to tighten and focus will be on wage growth.
The main event in the euro area before Christmas is the Spanish election due to take place on Sunday 20 December. In the first week of 2016, euro area HICP inflation for December 2015 is due to be released. We expect inflation to increase to 0.5% y/y in December from +0.2% y/y in November as the annual change in energy prices (despite the recent sharp decline in the oil price) should be less negative due to the base effects in 2014.
In Sweden , NIER is due to release the December business and consumer confidence surveys and a new economic forecast. We think it is especially important to monitor what businesses are saying about price plans.
Global macro and market themes
The markets are still too dovish on the Fed, in our view, with the next hike only priced in for June 2016.
Short-end US rates should rise in coming months with most of the increase happening in spring.
The USD is set to strengthen modestly versus EM and commodity currencies and is range-bound versus the EUR.
European equities are set to outperform US equities on widening rate differentials.
The wildcard is a continuing fall in oil prices triggering turmoil in the US high yield market and EM.
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