10 Mar 2017

The week ahead: Monday 13 March 2017

Philip Shaw

Chief Economist

The upcoming week is packed full of top-tier events, presenting the prospect of a volatile week in markets. The calendar includes a US Fed announcement, a key deadline on the US debt ceiling, parliamentary elections in the Netherlands and more discussion on the ‘Article 50’ Brexit trigger Bill in the UK Parliament.

  • Stateside, the FOMC announcement is due at 18:00 UK time (i.e. an hour earlier than normal after US clocks change) on Wednesday 15 March. The Fed looks to be locked onto a course that would see it raise the Fed funds target rate range by 25bp to 0.75-1.00%, short of a sizeable shock to market sentiment and/or a massive downside surprise in the February payrolls report. Note that with a March hike effectively a done deal, the key focus for markets will be the forward guidance on the prospect of rate rises ahead.

  • A few hours after the Fed announcement, at midnight local time, the US debt ceiling suspension expires. We are doubtful there will be an agreement that deals with this for the long-term, so the ceiling may either be re-suspended temporarily and renegotiated properly as part of tax reform talks, or the US Treasury moves into ‘extraordinary measures’ so the government can go on funding its obligations, for a while at least. Finally in the US, note that Republican aides have been reported saying that the White House is planning to submit President Trump's budget plan to Congress on 14 March.

  • In the Eurozone, the busy year of political events ramps up with the 15 March Dutch election. Until recently the Party for Freedom (PVV), who favours holding a referendum on leaving the EU, had been leading in polls. More recently the PVV has been overtaken by the incumbent Prime Minister Mark Rutte’s VVD party. It seems almost unthinkable that events unfold to take the Netherlands out of the EU; more likely is the outcome that a fractured picture of support across the main political parties leads to a drawn out period of coalition talks after the election; final results are due 6 days later.

  • Sticking with politics and as we edge closer to the first round of the French Presidential race on 23 April, Republican candidate François Fillon has been summoned to appear in court with regards to the allegation he paid his wife for a fake job - the hearing is on 15 March - two days before the official deadline for presidential candidates to register. Finally, in the Eurozone we may hear more on the progress in talks to try and resolve differences over Greece’s latest review, ahead of the 20 March Eurogroup meeting.

  • In the UK, we expect the government to continue its efforts to move closer to triggering Article 50 and commencing the Brexit process formally. The House of Commons will reconsider the Article 50 Bill after the House of Lords inserted amendments. The government is seeking to overturn these amendments in the Commons and then the Bill would have to pass back to the Lords. The government remains of the view that it is on track to trigger Article 50 by the end of March. Note that the Scottish National Party meets for its Spring Conference 17-18 March; expect more talk and perhaps a few more specifics on plans for a second independence referendum, which could well weigh on the pound. The UK also has a monetary policy announcement scheduled for the 16 March, though we expect no fireworks with Bank rate very likely to be held at 0.25% and the QE total maintained. Our preview to the meeting is available here.

  • In global events, the week will see G20 finance ministers and central bank governors meet in Germany, the first meeting involving the new US Treasury Secretary Steven Mnuchin. The draft-communiqué dropped the usual commitment to ‘refraining from competitive devaluations’ so one concern is that the event brings to the surface nerves over a more protectionist global marketplace, following the installation of the new Trump administration.VC

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