All eyes on fomc wording - Estrategia de expertos

UNICREDIT. News and Events:

• Fed: It seems more and more likely that the Fed will retain the "extended period" pledge today. If this is the case, we may need to delay the timing of the first rate hike (currently seen in September).
• US: History shows that the blizzards may weigh both on housing starts and (less intuitive) building permits. In February, we expect the former to decline to 560K vs. 591K, the latter to 590K vs. 622K.
• EU: Today, Greece is expected to present a progress report on its fiscal consolidation plan. Juncker’s statement that yesterday there was no decision on any specific aid for Greece doesn’t come as a surprise.
• GE: Business sentiment remained solid recently, and financial markets have recovered from Greek woes. Accordingly, we do not expect a further sizeable ZEW setback in March: we forecast 43.0 vs. 45.1.
• EMU: February HICP should be confirmed at 0.9% yoy, with the core rate likely to slow by 0.1pp to 0.8% yoy.
• FR: We see CPI inflation staying at 1.1% yoy in February. The CPI ex-tobacco should print at 118.75, consistent with a 1.0% annual rate.

FI/FX Strategy:

• Mkt recap/Overnight: It was a very quiet day in the bond market, with bonds moving in a tight trading range for most of the session. Greece outperformed the rest of periphery amid continuous talk of Greek aid.
• FI View: Today, the focus is on the FOMC meeting. A reiteration of the "extended period" wording should be supportive for Treasuries, although we would not expect a big rally. The short end should benefit the most, with the 2Y yield returning in the 0.80% area.
• IE: Today, Ireland will tap Irish Apr16 & Apr20 by EUR 1/1.5bn. YTD Ireland has already completed 42% of its yearly funding. We prefer Ireland to Portugal or Spain due to the more challenging fiscal environment of the latter. Hence, we like the Irish Apr20 vs. PGB Jun20 (22bp of yield pick-up, 6bp higher than the long-term average).
• FX: The inability of both EUR-USD and cable to hold Friday’s gains is a further proof that time is not ripe yet for trend reversals on FX majors. The data calendar today is quite heavy, but any reaction will easily give room to some book squaring ahead of the FOMC meeting outcome.
• EUR: A strong EUR rally is not in the cards yet, with also EUR-USD IMM short positions still at a record high. The 1.36 base is vulnerable during the Ecofin meeting today, but a still dovish Fed and soft US data could ease the selling pressure of late.
• JPY: The BoJ tonight might either expand its credit program or increase its JGB purchases or even set a timeframe for keeping the OCR close to zero. But this is unlikely to push USD-JPY above 91.25 for now. EUR-JPY still needs EUR-USD back above 1.3750 to climb back towards 125.
• CHF: SNB’s inaction on EUR-CHF was surprising, now that 1.4578, the level that sparked intervention a year ago, is also gone: the bank’s reply is critical to prevent investors from a quick test of 2008 lows below 1.44.
• GBP: Bearish BoE remarks, new rating woes and labor market worries hit cable, after it failed to break 1.52. Yet, the absence of major UK data today could spur some range trading, as long as the 1.50 base holds.