Welcome to the Monthly Report. This report breaks down our forecasts from the last month. Readers should note that Prattle’s central bank sentiment data was built to forecast market response, not policy decisions. Prattle has discovered, however, that our data is remarkably suited to predicting both.
September 6: Reserve Bank of Australia
Forecast: Hold
Policy Decision: Hold
Market Interpretation: Dovish* (residual** -1.94)
Data signal***: Rebounding sentiment with aggregate trend below neutral
September 7: Swedish Riksbank
Forecast: Hold
Outcome: Hold
Market Interpretation: Neutral (residual 0.23)
Data signal: Slightly hawkish trend (momentum 0.27) coupled with postponement of hikes indicated in previous meeting
September 7: Bank of Canada
Forecast: Hold
Outcome: Hold
Market Interpretation: Hawkish (residual 0.79)
Data signal: Neutral communications (momentum -0.11) leading up to meeting
September 8: European Central Bank
Forecast: Hold
Outcome: Hold
Market Interpretation: Neutral (residual -0.05)
Data signal: Slightly hawkish trend (momentum 0.27) ahead of meeting
September 8: Bank of South Korea
Forecast: Hold
Outcome: Hold
Market Interpretation: Hawkish (residual 1.09)
Data signal: Hawkish score of minutes from previous meeting
September 15: Bank of England
Forecast: Hold
Outcome: Hold
Market Interpretation: Dovish (residual -0.79)
Data signal: Rising trend (momentum 0.25) after initiating stimulus in early August
September 21: Federal Reserve
Forecast: Hold
Outcome: Hold
Market Interpretation: Neutral (residual 0.05)
Data signal: Aggregate trend below the high point reached ahead of December 2015 hike
September 21: Bank of Japan
Forecast: Hold rates and amend bond purchasing
Outcome: Hold, amended bond purchasing
Market Interpretation: Hawkish (residual 1.27)
Data signal: Negative trend and significantly dovish momentum (-0.60) combined with wide dispersion of sentiment scores
September 21: Reserve Bank of New Zealand
Forecast: Hold
Outcome: Hold
Market Interpretation: Neutral (residual 0.05)
Data signal: Gradual rise in sentiment (momentum 0.01) coupled with encouraging economic data
September 22: Norges Bank
Forecast: Hold
Outcome: Hold
Market Interpretation: Slightly hawkish (residual 0.23)
Data signal: Rebounding sentiment trend coupled with rising inflation and housing price growth
September 22: Bank of Turkey
Forecast: Cut
Outcome: Cut
Market Interpretation: Slightly hawkish (residual 0.17)
Data signal: Flat to slightly hawkish sentiment (momentum 0.13) combined with political pressure, slowing growth, and strong currency after recent rate cuts
September 26: Bank of Israel
Forecast: Hold
Outcome: Hold
Market Interpretation: Dovish (residual -0.57)
Data signal: Declining sentiment (momentum -1.14), a strong shekel, and the recent Fed rate hold
September 29: Bank of Taiwan
Forecast: Hold
Outcome: Hold
Market Interpretation: Neutral (residual -0.01)
Data signal: Slightly hawkish momentum (0.19) after a June cut
September 29: Bank of Mexico
Forecast: Hawkish Hold
Outcome: Hike
Market Interpretation: Hawkish (residual 1.32)
Data signal: Somewhat hawkish momentum (0.18), limited communications from policymakers
The Signal Team
* Prattle’s models are based on the historical relationship between central bank language and market reaction, which is used as basis of evaluation for future communications. The scores are normalized around zero and range between -2 and 2, negative numbers indicating dovishness and positive numbers indicating hawkishness.
** Residual scores represent the tone of a communication compared to the rolling, 12-month average for that individual communication type or speaker. Raw scores represent the tone of a communication compared to the average of all communications.
***Refers to data available when forecasts were published prior to policy decisions.
Disclaimer: the forecasts provided herein are based upon sources believed by Prattle Analytics, LLC D/B/A Prattle, to be reliable and to be developed from models which are generally accepted as methods for producing economic forecasts.
Prattle cannot guarantee the accuracy or completeness of the information upon which this Report and such forecasts are based. This Report does not purport to disclose any risks or benefits of entering into particular transactions and should not be construed as advice with regard to any specific investment or instance. The opinions and judgments expressed within this Report made as of this date are subject to change without notice.
Copyright © 2016 Prattle Analytics.