Norges Bank Due
North American markets are expected to gradually return to normal and with some key data points looming, investors will hope to have the means to factor in any material changes. Ahead today, Norges Bank will hold its policy decision while the Eurogroup is also expected to hold a conference call to discuss the status of the Greece bailout. Even though the Greek government has edged closer to pledging further reforms, Bloomberg reported that Prime Minister Samaras is pushing ‘for a somewhat flatter adjustment path’, while the creditor nations are understandably concerned about political implications domestically. Back in the US, several news sources have reported the economic damage to Hurricane Sandy and our economists note that estimating the overall economic effects is difficult at this stage given the rarity of storms in densely populated areas. Current estimates range from $10bn to $45bn. On the policy side, Minneapolis Fed President Kocherlakota is now a fully-fledged member of the dovish camp at the Fed, having gradually abandoned his hawkish views over the past few months. Overnight he said he strongly disagrees with the view that Fed policy is too easy and that, if anything, settings are still too tight given the forecasts for low inflation and high unemployment. Kocherlakota expressed optimism that a political solution will be found so that the US fiscal cliff can be averted in time − both he and Bank of Canada Governor Carney have now made their views clear on the matter although other policymakers have mostly maintained their silence. Ahead today, Chicago PMI is out at 9:45 ET. The market will be looking for a swift move back up to 51.0 after the surprising August print, which should dip below 50 for the first time since the end of the global financial crisis. Of course, the payrolls number will retain top billing heading into the weekend and there will be interest as to whether the US economy has managed to match trends seen elsewhere, especially in emerging markets, which point to a cyclical uptick in general conditions, and which has created more favourable conditions for risk in the near term. With Eurozone event risk now being priced out well into next year, however, US-headline risk especially after the elections could play a greater role, and we do expect price action to gradually incorporate such factors. Overnight EURUSD traded 1.2947-1.3021 and USDJPY 79.53-79.85.
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UBS Investment Bank