Macro week preview - FOMC meeting, new data and much more

Looking towards this week’s trading, the calendar is enticing. Eco data releases are back-loaded in the US , as retail sales, claims and PPI are published on Thursday, while industrial production, PMI and CPI are published on Friday. The FOMC meeting on Wednesday, including an expected announcement of more Treasury bond buying, new forecasts and a press conference will get a lot of attention too. We expect the announcement of a programme of $45B/month purchases of US Treasuries (to replace operation twist), but no announcement yet on changes in the communication about future policy changes. Talk on the fiscal cliff is potentially a market mover too. On Friday, democrats and republicans accused each other from blocking the talks, without however giving info about these talks. Potentially better news on Sunday, as president Obama met House leader Boehner in the White House apparently to negotiate. A president spokesman said “we are not reading out details of the conversation, but lines of communication remain open”. Broadly similar language from the side of Boehner. This might signal that both sides have now entered serious talks after having had more eye for their positioning towards their constituencies previously. Finally, the US Treasury will issue 3, 10 and 30-year Notes/bonds via auction for a combined amount of $66B.

In EMU, following the sharp growth downgrade by the ECB and talk about a rate cut, markets will closely watch the key eco data releases. On Tuesday, the December ZEW survey and the advance PMI’s on Friday. The latter have been brought forward due to the upcoming Christmas holidays. Still more important will be the political activity. On Wednesday, an Ecofin meeting will try to reach agreement on pending issues regarding the banking union ahead of the EU Summit that takes place on Thursday and Friday. EMU Finance Ministers will meet on Thursday to discuss the results of the Greek debt buyback (see above) and clear some practical issues before the disbursement of the next tranche of the Greek rescue loan can take place. The Spanish and Italian auction on Thursday are important too, especially after the renewed political tension in Italy (see higher). So, it will still a very busy week in markets, despite the drying up of activity as more and more market participants are closing their books.