At this point, the FED Funds futures market is pricing in a 95% certainty of an upward adjustment to the Fed Funds target and a 40% chance of another adjustment by May of 2017.
Sunday will be the Presidential elections in Austria and the Parliamentary referendum in Italy. Between these two events, it’s more likely to expect a market moving result from the elections in Austria. If the Italian people vote “No” to the constitutional changes proposed on the ballot, the worst case result is that PM Matteo Renzi will be replaced by some other non-elected technocrat designated by the EU.
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However, if the Freedom Party leader, Norbert Hofer, is elected as the next president of Austria, his promises to hold a “Brexit” style referendum, combined with his general disdain for EU policymakers in Brussels, could pressure G-7 equity markets lower.
USD and US Stock indexes look technically stretched; internal volume and “breadth of market” indicators are showing signs of rolling over. It seems the slightest fundamental disruption to the current expansionary theme could trigger a pullback.
