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A series of unforeseen events?

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Financial markets are, theoretically, supposed to provide in all available information in an efficient manner. This means that surprises should move asset prices, and events that proceed as expected should leave markets unmoved. This week would seem a good week to test that theory.
  • UK Prime Minister May is expected to invoke Article 50 of the Treaty of Lisbon, any time from Tuesday. This begins the long goodbye from the EU. There is no surprise in the event, though perhaps the EU reaction (apparently they have prepared a reaction) has the potential to surprise.
  • The US Federal Reserve announces its policy decision on Wednesday. The Fed does not like surprising investors. Investors' expectations for a rate rise have not been corrected by Fed speakers. It seems unlikely that anything other than a rate rise will occur. Nuances around the nature and pace of future tightening are the potential surprise.
  • Dutch general election results should be known on Thursday morning. The current government will continue in office until a new coalition is formed (that can take weeks, or months). The Freedom Party is unlikely to join the new government. Whether the perceived populist trend is shaken is the potential surprise.