The big week is finally here. After all this year’s build up, speculation and analysis, the key December meeting has arrived and we will finally find out whether the world’s largest economy; the US will finally raise rates for the first time in nearly 10 years. The key components however will not just be the rate rise itself but also the pace of following rate rise expected in 2016. The statement and press conference will be interesting to watch and gain an insight into the Fed’s 2016 plans.
Also on this week’s docket we have key inflation data to and from the pond, a raft of Eurozone PMI figures and crucial labour data from the UK.
Euro area Industrial production and speeches from ECB President Draghi and the Bank of England’s Shafik are expected to draw markets’ attention today. A small increase is forecast for Industrial production this morning. Germany; the Eurozone’s powerhouse have already posted a smaller than expected rise of 0.1%, potentially reflecting ongoing soft external demand.
Key inflation data from both the UK and US will grab Tuesday’s headlines. Although these releases are unlikely to change the rate hike expectation, we may still see a relevant movement in the markets during the release of these two readings. German ZEW economic sentiment is scheduled for release early Tuesday morning, with a rise to 15.2 forecast.
The Fed are expected to raise rates tonight for the first time since June 2006. This month’s highly anticipated labour data suggested that the US remain on track to raise rates this month after non-farm payrolls rose 211K in November with a 35K of upward revisions to the prior two months. A solid data trend has pushed the probability of a hike to 78% according to Bloomberg. However, all will be revealed tonight at arguably the biggest meeting of the year. Also on Wednesday’s docket we have a raft of Eurozone PMI data and some key labour data from the UK, in the form of the unemployment rate and average earnings index.
UK retail sales is forecast to bounce back this week after last month’s poor 0.6% decline. Christmas sales have no doubt boosted this number with markets expected to rise to 0.4%. German Ifo business climate is scheduled to hit the wires early this morning.
Activity in the US economy’s biggest sector is expected to increase to 57.1 from 56.1. We also have Fed member Jeffrey Lacker speaking at the Charlotte Chamber of Commerce late tonight. Lacker will be addressing the economic outlook for 2016.