3 Themes for 3 Months
The Senate-penned deal might not be perfect, but it has done the job and markets will take what it can get in terms of fiscal stability until Congressional battles pick up again. At present, the government does not need to worry about funding or operational capacity for another 3 months or so until January 15th. In private policymakers will still be nervous at the lack of a longer-term deal, as the potential for renewed uncertainty means that it is impossible set policy for the longer-term. As the FOMC is not in the business of ‘tactical’ policymaking either like some of its peers, it is likely that they will communicate to markets that changes to the QE programme will be a non-starter until the fiscal impasse is resolved on a structural basis, and there may even be scope for more if they wish to not take chances with fiscal drag. As such, non-US/Fed short-term themes should feature heavily.
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