By Michael O’Neill; Agility FX Senior Analyst
In Gordon Lightfoot’s famous song, “The Wreck of the Edmund Fitzgerald”, it was the skies of November that turned gloomy. This year, it may be the financial markets of November that are gloomy.
And they have right to feel that way. Various members of the Federal Open Market Committee (FOMC) have given every indication that the November 1-2 policy meeting will be a non-event for markets. Decisions, if any, will be made at the December 13-14 meeting. That meeting will also include a new Summary of Economic Projections and a press conference with Federal Reserve Chair Janet Yellen. This meeting doesn’t have either.
The Bank of Japan (BoJ) Monetary Policy meeting is also at the beginning of November. Their experience with providing stimulus failed to have the desired effect recently which led to a re-working of their policy framework at the September 21 meeting. These changes which included “yield curve control” and a plan to “exceed the 2% inflation target as a means to generate inflation expectations” are on-going and unlikely to be tweaked. On October 27, Mr. Kuroda’s testimony to the Japanese Diet didn’t do anything to suggest that additional stimulus measures would be forthcoming at the November 1, BoJ meeting. What may change is the forecast for when inflation would hit the target. That forecast could be pushed out into 2018.
The Reserve Bank of Australia, fresh off a rate cut in August and still basking in the glow of a 0.7% rise in Q3 inflation, isn’t expected to announce any policy changes at the November 1 meeting. Across the Tasmanian Sea, the Reserve Bank of New Zealand is widely expected to cut interest rates by 0.25% to 1.75%. No action and some action but no surprises anywhere.
The Bank of England policy meeting on November 4 may be lacking in drama. The new Chancellor of the Exchequer, Phillip Hammond, has stated that there will be a “fiscal reset” when he presents his Autumn Statement on November 23. The Bank of England Governor, Mark Carney is unlikely to upstage the Chancellor by announcing any changes to monetary policy, making this meeting a non-event.
The European Central Bank (ECB) doesn’t meet at all in November. At the October 20 meeting, ECB President Mario Draghi indicated that the current quantitative easing program wouldn’t be in place forever and then added that although tapering wasn’t discussed, an abrupt end to the program was unlikely. Those remarks increased the focus on the December meeting.
On November 8, Americans go to the polls. The psycho circus that was this presidential campaign comes to an end. There is a very good chance that we have “President Clinton Part ll”. Markets would like the continuity that Hillary’s presidency would bring which implies equity market friendly policies in a very low rate environment.
“Good-bye Donald, thanks for the memories… and the office”. Photo: Shutterstock
The 171st (Ordinary) Opec meeting will be held November 30, in Vienna, Austria. This is the meeting where the details of Opec production caps that were agreed upon at the end of September will be unveiled. Iran, Libya and Nigeria were exempted from participating and now other countries, including Iraq, want to be excluded.
NATO is staring down Russia. Germany, Canada, Britain, America and other Nato members are sending planes and troops to Russia’s borders. Nato Secretary-General Jens Stoltenberg said the new 4,000 strong force was a measured response to what Nato believes are 330,000 Russian troops amassed near Moscow. He should check his measurements. In addition, Russia has an 8-ship battlegroup near Syria.
On the other side of the world, the Chinese Navy decided to hold “drills” in the South China sea which may or may not have had anything to do with the US Navy’s USS Decatur conducting a “freedom of navigation” cruise near disputed islands.
Philippine President Rodrigo Duterte is already at war with the US administration. He is tired of the US treating the Philippines as “dogs on a leash”, has threatened to end military agreements and could join sea exercises with Japan. Obviously, he hasn’t heard of Douglas MacArthur.
There are a lot of central bank meetings, an Opec meeting and a US election on the November docket. Normally, that would imply an elevated event risk. Not this time. Policy makers appear eager to defer decision making until December, perhaps in a belief that yearend and Yule time festivities will lessen the impact. The geopolitical risks are real but until the bullets start flying the markets will not care.
“The wind in the wires made a tattle-tale sound
And a wave broke over the railing
And every man knew, as the captain did too,
T’was the witch of November come stealin’”
Source: The Wreck of the Edmund Fitzgerald, Gordon Lightfoot 1976