A look at the day ahead in European and global markets from Tom
Westbrook
Kevin Warsh wraps up his first Federal Open Market Committee
meeting with tumbling oil prices and a tentative peace offering
a helpful backdrop for leaving interest rates on hold, as
traders expect.
Market focus will be on how he votes, his news conference
and how he navigates explaining the outlook.
Warsh is not a fan of "forward guidance", and may choose to
refrain from offering a projection for interest rates as part of
the quarterly economic outlook the U.S. central bank publishes.
But he was picked by U.S. President Donald Trump to cut
rates and, with inflation above target and employment solid,
markets expect a hike. So he will be asked about it and the
dollar has been dithering this week, waiting to hear from him.
If he does not push back on market pricing, investors might
take that as a hawkish signal. But if he does, then investors
might worry about inflation - leaving a delicate task.
He'll also have to face a boardroom where his predecessor,
Jerome Powell, still has a vote.
Perhaps the Bank of Japan's Deputy Governor Shinichi Uchida
offered a template of a steady hand on Tuesday. He managed to
preserve policy flexibility without spooking markets.
Uchida did have a bit of extra help from Japan's finance
ministry, which is lurking just off-stage with threats to
intervene in the currency market, should the yen fall again.
Asian markets traded mostly sideways on Wednesday, with
Warsh the main show in town and sellers of oil taking a breather
to wait for confirmed details of the U.S.-Iran agreement.
Brent futures have sunk below $80 a barrel on reports the U.S.
plans lifting sanctions on Iranian oil. Other than the Fed show
on Wednesday, Sweden's Riksbank is expected to be on hold but
signal a hike could be coming later this year.
British inflation is seen creeping up to 3% thanks to higher
oil prices, while final European readings are not expected to
deviate from preliminary figures.
Key developments that could influence markets on Wednesday:
- Rate decisions in the U.S. and Sweden
- British inflation
- U.S. retail sales data
(Editing by Muralikumar Anantharaman)