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Monday, September 18

18th Sep - Fed week begins with ease

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EZ Outlook: Solid recovery, slow inflation, gradual ECB stepsNordea
The growth outlook is positive and over time growth should feed into somewhat higher inflation, allowing the ECB to withdraw monetary stimulus. Cautious rate hikes are for 2019.

Europe’s Desired Oversight Body Needs the Right NameBB
 ‘European Monetary Fund’ is said to draw objection from ECB * Commission President Juncker used the term in Sept. 13 speech

Poland's Authoritarian Shift Spurs Warning of Economic TroubleBB
Investors fret about Polish justice, top EU official says * Timmermans speaks in interview before Sept. 25 EU talks

German election update: Merkel’s coalition partner(s) matterNordea
While Merkel will almost surely secure herself another 4-year term, her coalition partner matters for the policy choices made. Bond yields and the euro would have more upside potential with SPD or the Green Party in the government.

Germany’s Most Likely Coalitions Probably Won’t Help the EconomyBB
Bloomberg survey of 26 economists examined policy outlook * CDU/CSU and Free Democrats best for economy, third-most likely

One Million Refugees Came - Here's What Happened Next BB
Germany has done much to integrate the newcomers, but politics and bureaucracy have left too many without options.

Target2 balances reflect euro area’s potential to be better than traditional exchange rate peg regimeFT

ECB Bond Reinvestments Could Be Shock Absorber as QE Decelerates BB
About 15 billion euros a month of holdings will mature in 2018 * Board member Praet says stimulus reduction must be orderly

Annual inflation up to 1.5% in the euro area Eurostat

Frustration With Republicans Drove Donald Trump to Deal With Democrats – WSJ

Will the Fed’s balance sheet reduction avoid another taper tantrum?FT

Citi: Will the Great Taper Bring on GFC 2.0?

BofA: Central Bank Liquidity Is Why Stocks Are At Record HighsZH

Deutsche Bank: "Global Asset Prices Are The Most Elevated In History"ZH

Markets are wrong: the ECB will not outpace the FedNordea
Financial markets continue to doubt the tightening plans of the Fed and also the Bank of England longer into the future, but expect the ECB to be able to withdraw stimulus at a faster pace. History strongly suggests this will not happen.

Rates: Volatility Low, staying lowNordea
Both implied and realised volatilities have recently traded close to historic lows. Significantly higher volatility is not warranted in the near future. We find pricing covering the ECB October meeting too rich.

Yen Weaker After Abe Decides To Hold Snap Elections ZH

Dollar and Rates Bounce Imminent? Macro Man

FX weekly: Honey, I shrunk the balance sheet Nordea
A balance sheet run-off decision seems obvious from the FOMC this week, but 10 $ bn. pr. month initially won’t matter for the USD. But for other reasons we could be about to see a less benign flow picture for the EUR in the coming weeks and months.

Key Events In The Coming Week: All Eyes On Fed Balance Sheet AnnouncementZH

Harvey and Irma Have Global Market ImplicationsBB
The fallout for investors is likely to include a delay in the normalization of interest rate policies and a further weakening of the dollar.

In a Great Recession, the case for flexible exchange rates is alive and wellvoxeu
The classic rationale for flexible exchange rates was that policymakers would be unconstrained by currency targets. The Great Recession, however, saw numerous central banks constrained instead by the zero lower bound. This column considers which exchange rate regime is best for small open economies in a global recession. The model suggests that if the source of the shock is abroad and foreign interest rates become constrained at their zero lower bound, then flexible exchange rates do provide a great deal of insulation to the domestic economy.

China Economic Outlook: Towards the Party Congress and beyondNordea
China’s near-term growth prospects have remained robust and we expect GDP growth above 6% to continue in 2017-2019. The immediate economic impact of the Party Congress in October is estimated to be small.

Bridgewater’s Ray Dalio Spreads His Gospel of ‘Radical Transparency’
Mr. Dalio has created an unusual and confrontational workplace at Bridgewater Associates, the
world’s largest hedge fund firm. With a new book, he hopes to inject his ideas into the mainstream.

Finance: How it Made Civilization PossibleCFA Institute

The moral ambivalence of Gordon GekkoChicago Booth
Wall Street turns 30 this year. Is the movie’s hero a miscreant or a role model?

MiB: Victor Niederhoffer Barry Ritholtz

Morning Report APACTF
Investors on Wall St largely shrugged off the most recent North Korean provocation as they pushed key indices higher. Meanwhile there's plenty of factors at play in commodities markets. And markets are keenly awaiting the outcome of this week's Federal Open Market Committee meeting.

FirstFT Daily BriefingFT
Pressure on Facebook, Slack's $5bn valuation, surviving the open plan office

May in Trans-Atlantic Trade Spat, Qatar Deal Boosts BAE, Three Speeches to Shape Europe

“Best of the web” daily chartsLukas Daalder

Danske DailyDanske Bank

Final Euro-area inflation today, FOMC meeting in focus this week * Market pricing of Fed and the dot plot are out of sync * Slight negative EUR/USD bias

Morning Markets TF
Last week’s Bank of England hawkishness the retreat from North Korea-inspired risk-off Wednesday’s Federal Open Market Committee meeting and the expectation of an imminent purchase taper from the European Central Bank have combined to depress core bond prices.

From the FloorTF
It's a big week for central banks as the ramifications of the Fed's recent hawkish signals continue to unfold and markets prepare for its FOMC meeting on Wednesday as well as a flurry of news from the Japanese, Australian, Norwegian and South African banks.

Daily Market CommentMarc Chandler
More Thoughts from Berlin

Brussels PlaybookPolitico
Tech’s political immunity ends — United Nations week — António Costa interview

US PlaybookPolitico

Five Things You Need to Know to Start Your DayBB
North Korea pressure campaign * China’s capital control opening * Brexit battles * Markets rally

Global Stocks Storm To New Record High Ahead Of Historic Fed Announcement


FX UpdateTF
Currency markets are eyeing the FOMC and BoJ this week after massive recent upgrades of the policy paths for the Bank of Canada and Bank of England. The Fed expectations for balance sheet reduction are likely priced in but how will the Fed deal with the market’s second-guessing of its longer-term forecasts?

Fed kokoustaa keskiviikkona - Taseen supistaminen alkaa * Venäjän keskuspankki leikkasi ohjauskorkoaan 8,5 prosenttiin * Punta jatkoi vahvistumistaan