All eyes on the Fed this week as the market becomes more and more focused on whether the word “patience” will be dropped from their statement this Wednesday. Considering the focus that certain wording elements of the Fed’s statements have attracted in the past it will not come as a surprise if they remove “patience” to avoid any further controversy, but no doubt observers will pick up on other or new language to gauge the tone from the Federal Reserve, with particular scrutiny being given to their latest dot chart update. Their challenge however is to deal with further evidence that the US economy is not a strong as had been previously thought, with last week revealing poor retail sales and a weak Michigan Consumer Sentiment number. Whilst unemployment continues to fall, wage inflation remains below what the Fed had been hoping to see and so calls for a hike in June seem premature. Markets are pricing in late summer to early autumn for the first hike as US Treasury yields fail to recapture the highs set following the nonfarm payroll earlier in the month.
Things are quiet on the economic data front today, although US industrial production will be watched closely at 13.15 GMT. Sterling will be a focus throughout the week as we build up to Wednesday’s UK Budget, the final one to be delivered by the incumbent administration ahead of May’s General Election.