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The week ahead is the busiest week of the first quarter.  It sees four major central meetings, including the Federal Reserve which is likely to raise rates for the second time in four months. The Dutch hold the first European election of the year, and the populist-nationalist party remains in contention for the top slot. The week concludes with the G20 meeting, the first that the Trump Administration’s presence will be felt.

Since the events are well known, we may be able to add the most value by sharing our expectation of the outcomes and significance for the capital markets.  The immediate backdrop is solid US jobs growth, heightened expectations of a hike, firm eurozone data, stabilization of the Chinese economy, capex and export-led expansion of the Japanese economy, and a pullback in commodity prices, including oil, after a run-up that carried over from last year.   Interest rates are mostly moving higher, and equity markets have been trading heavier after a strong start to the year.

1.  FOMC meeting:  The combination of data and official comments spurred a sharp swing in expectations toward a rate hike on March 15.  There is no reason to think that the Fed will not deliver. This is taken as given now, and investors will be more interested in the updated forecasts (dot plot) and the context Yellen provides at her press conference.   While the last set of forecasts showed the median expectation (not a promise or commitment) that three rate hikes would be appropriate this year, the market is unconvinced.  It is discounting about a one in three chance that the Fed will deliver three hikes this year.  We suspect the market is underestimating the hawkishness of many regional presidents, some of whom will be emboldened by the resilience of the US economy as they have argued. To the extent that the forecasts are changed, we expect more dots to be raised.  We see the confidence of the Fed officials, seen in subtle shifts in their word cues, as indicative a different reaction function.  Previously officials needed confirmation that the recovery was resilient.  It has become convinced.  Now it is looking for appropriate opportunities.  A hawkish hike, as opposed to the past two dovish hikes, could support the dollar and spur bearish curve flattening (short-term rates rise more than long-term rates).  If the Fed statement, forecasts, and press conference fail to convince the market that a follow-up hike in June ought not to be ruled out, the dollar would likely sell-off, as stale longs move to the sidelines.  A rally in bonds would likely weigh on the dollar against the yen.  Rising yields are seen helping banks and other financial institutions.  A fall in yields may see some investors shifts into other sectors.