Ulster Bank Markets Daily Top 3

FOMC Minutes: No change in outlook for December

The FOMC minutes said that many FOMC participants thought a rate hike in the near-term was likely to be warranted. The discussion of growth highlighted the ongoing strength in the labour market while frequently referencing the disruptions in the data due to hurricanes. On inflation, the Fed continued to discuss the risks around inflation, with “many” concerned that weakness in inflation may prove to be not just due to transitory factors. The shape of the yield curve was not discussed, but a couple of participants did bring up the possibility of alternate frameworks in pursuing monetary policy. The USD softened, adding to earlier losses, and US Treasury bonds added to their earlier gains through the release. On the economic data front yesterday in the US, durable goods orders were -1.2% month on month in October, well below the consensus expectation of a 0.3% month on month gain. US initial jobless claims were 239K in the week ended November 18th versus expected 240K. US November U of Michigan sentiment index was revised up in the final reading from 97.8 to 98.5.

Review of the UK Budget

The November 2017 Budget brought modest downward revisions to the Central Government Net Cash Requirement (CGNCR) – the main borrowing aggregate which underpins Gilt issuance. So, a dull Budget, then. No. What was not expected was the scale of the subsequent increase in borrowing. CGNCR borrowing was revised up by a cumulative £50.8bn over the five years to 2021-22 FY. The increases are particularly large from 2019-20 FY onwards. The key point – looking through the unappetising alphabet soup of public accounting acronyms – is that actual UK Government borrowing (and actual Gilt issuance) is going to be substantially higher than the market expected. However the Gilt market reaction yesterday was relatively muted (with 10-year Gilt yields rising by less than 1bp. The OBR slashed its productivity and GDP forecasts. On average, annual GDP growth forecasts were lowered by 0.4% points – an innocuous looking reduction in any given year, perhaps, but one which has radically worsened the medium-term fiscal projections.

For the day ahead

Today the US celebrates Thanksgiving, Americans are expected to eat about 46 million turkeys during their traditional family feasts, and the cost to feed 10 people has apparently fallen to its lowest cost since 2013, US equity and bond markets will be closed. Whilst in Europe, the ECB publishes the account of its October 26th monetary policy meeting at 12:30 in Frankfurt. We also receive German Q3 Final GDP at 7.00am and UK Preliminary GDP at 9.30am.



This document is intended for clients or potential clients of Ulster Bank Limited and Ulster Bank Ireland DAC (together and separately, "Ulster Bank") and is not intended for any other person. It does not constitute an offer or invitation to purchase or sell any instrument or to provide any service in any jurisdiction where the required authorisation is not held. Ulster Bank and/or its associates and/or its employees may have a position or engage in transactions in any instruments mentioned.

The information including any opinions expressed is indicative and may constitute our judgement at time of publication and are subject to change without notice. The information contained herein should not be construed as advice, and is not intended to be construed as such.

This publication provides only a brief review of the complex issues discussed and recipients should not rely on information contained here without seeking specific advice on matters that concern them. Ulster Bank make no representations or warranties with respect to the information and disclaim all liability for use the recipient or their advisors make of the information.

Ulster Bank Ireland DAC. A private company limited by shares, trading as Ulster Bank, Ulster Bank Group, Banc Uladh and Lombard. Registered in Republic of Ireland. Registered No 25766.

Registered Office: Ulster Bank Group Centre, George’s Quay, Dublin 2. Member of The Royal Bank of Scotland Group.

Ulster Bank Ireland DAC is regulated by the Central Bank of Ireland. Calls may be recorded.

Ulster Bank Limited Registered Number: R733 Northern Ireland. Registered Office: 11-16 Donegall Square East, Belfast BT1 5UB. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, and entered on the Financial Services Register (Registration Number 122315). Calls may be recorded.


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