Willow Lane Acquisition Corp. (WLACU) IPO: A Closer Look at an Emerging Opportunity

Economic

Summary:

Discover the details behind Willow Lane Acquisition Corp.'s (WLACU) IPO. Learn about its target market, leadership, and the strategic direction of this blank-check company poised for growth.

Willow Lane Acquisition Corp. (WLACU) is preparing for an IPO that will offer investors an opportunity to participate in a blank-check company. These types of companies exist with the sole purpose of merging with or acquiring a promising business. Founded with the aim to target middle-market companies, Willow Lane is focusing on businesses with enterprise values under $1 billion, although they are open to pursuing larger acquisitions. This IPO marks a key step for Willow Lane, offering investors an exciting entry point into a dynamic and flexible investment strategy.

Company Overview and Strategy

Willow Lane Acquisition Corp. is a special purpose acquisition company (SPAC), which means it has been established to raise capital through an initial public offering, with the primary objective of completing a merger or acquisition. This type of company has no operations of its own but is instead a vehicle for merging with an existing company. The goal is to identify an underperforming or high-potential business, work alongside its management team, and accelerate growth by investing capital, applying disciplined financial strategies, and improving overall business results.

The company's management team is highlighted for its track record of acquiring high-quality assets at attractive valuations. The leadership's expertise in operational improvement and financial management is key to their business approach, making them well-suited to drive successful acquisitions in the middle market. While the exact target industry or company remains unspecified, the focus is on finding an established business poised for further growth.

The IPO Details

The Willow Lane Acquisition Corp. IPO is set to offer 11 million shares, each priced at $10.00. The IPO is expected to raise approximately $110 million. This offering is being managed by BTIG, LLC, which is coordinating the underwriting process. Investors in this IPO will be purchasing shares in a company that intends to pursue an acquisition, making the investment inherently speculative yet potentially rewarding depending on the success of the chosen acquisition.

The IPO’s pricing and terms are in line with many SPAC offerings, which typically involve a fixed share price of $10 per unit. These shares are often structured to include a warrant, which can provide additional opportunities for returns depending on the future performance of the acquired business.

Market Outlook and Potential for Investors

The blank-check company model has become increasingly popular, offering a unique way for investors to gain exposure to high-growth companies without the typical volatility of traditional public offerings. For Willow Lane, the opportunity lies in its management team’s ability to identify and partner with companies that have a strong management foundation and are ripe for growth.

However, potential investors should be aware of the risks inherent in SPAC investments. Since there are no operational revenues or assets at the time of the IPO, the primary value lies in the potential success of the future merger or acquisition. The outcome is highly dependent on the management team’s ability to make the right acquisition decisions.

Conclusion

The WLACU IPO represents an exciting chance for investors to enter the world of SPACs, with the prospect of participating in the growth of a middle-market company. With a strong management team and a strategic focus on growth, Willow Lane Acquisition Corp. may offer substantial opportunities in the future. However, like all SPACs, it carries a level of risk that must be carefully considered.

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Risk Warnings and Disclaimers

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Glendon

Economic

Wing Yip Food Holdings Group Limited (WYHG) is poised to make its market debut with a public offering that has attracted significant attention from both analysts and investors. As the company looks to raise capital for expansion and further operations, the IPO presents a crucial moment in the broader food service sector.

Background of Wing Yip Food Holdings Group

Wing Yip is a leading player in the food wholesale and distribution industry, focusing on providing quality food products to Asian and European markets. The company's track record of growth and innovation in food services positions it well for future opportunities, especially in an increasingly globalized market. Their IPO aims to tap into public market capital, offering investors a chance to get involved in the global expansion of the food supply chain.

IPO Pricing and Market Data

The company plans to offer 2.1 million shares at a price range between $4.00 and $5.00 per share. This offering could raise as much as $9.2 million, which is intended to support the company's growth initiatives. The IPO is scheduled to take place on November 8, 2024, with a listing on the NASDAQ.

This debut comes at a time when demand for quality wholesale food services is at an all-time high, driven by the ongoing growth in international cuisine and trade between markets. Investors are closely watching this IPO for any potential upside, especially given the robust market trends in the food distribution sector.

Key Details to Note:

Shares Offered: 2.1 million

Price Range: $4.00 – $5.00 per share

Estimated Proceeds: $9.2 million

Offering Type: Uplisting to NASDAQ

IPO Date: November 8, 2024

Lead Underwriters: Dawson James Securities and EF Hutton.

Why Investors Are Watching WYHG

Wing Yip’s strong reputation in the wholesale food sector, combined with its expansive customer base, makes it a potentially valuable addition to any investment portfolio. With a foothold in both the Asian and European food markets, the company has significant room to scale, particularly in untapped territories. The IPO could provide investors with early exposure to this expanding market as global food supply chains grow more interconnected.

Furthermore, as food distribution remains a crucial industry globally, Wing Yip’s established supply chain and wide product range offer long-term stability in an otherwise volatile market. The low-to-mid-range price per share also makes this offering accessible to a broader spectrum of potential investors.

Potential Risks and Market Conditions

Though the IPO is promising, investors must consider potential risks. The global food industry can be affected by geopolitical factors, supply chain disruptions, and regulatory changes. Furthermore, the company's heavy reliance on both Asian and European markets means that economic slowdowns or changes in consumer trends in these regions could impact future profitability. However, these risks are mitigated somewhat by Wing Yip’s diversified operations and solid market positioning.

Conclusion

With the IPO just around the corner, Wing Yip Food Holdings Group presents an intriguing opportunity for those interested in the food service and wholesale distribution sectors. The market debut, while relatively modest in size, could open up exciting growth prospects, especially as the company scales operations internationally.

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Warren Takunda

Economic

No one knows how Tuesday’s presidential election will turn out, but the Federal Reserve’s move two days later is much easier to predict: With inflation continuing to cool, the Fed is set to cut interest rates for a second time this year.

The presidential contest might still be unresolved when the Fed ends its two-day meeting Thursday afternoon, yet that uncertainty would have no effect on its decision to further reduce its benchmark rate. The Fed’s future actions, though, will become more unsettled once a new president and Congress take office in January, particularly if Donald Trump were to win the White House again.

Trump’s proposals to impose high tariffs on all imports and launch mass deportations of unauthorized immigrants and his threat to intrude on the Fed’s normally independent rate decisions could send inflation surging, economists have said. Higher inflation would, in turn, compel the Fed to slow or stop its rate cuts.

On Thursday, the Fed’s policymakers, led by Chair Jerome Powell, are on track to cut their benchmark rate by a quarter-point, to about 4.6%, after having implemented a half-point reduction in September. Economists expect another quarter-point rate cut in December and possibly additional such moves next year. Over time, rate cuts tend to lower the costs of borrowing for consumers and businesses.

The Fed is reducing its rate for a different reason than it usually does: It often cuts rates to boost a sluggish economy and a weak job market by encouraging more borrowing and spending. But the economy is growing briskly, and the unemployment rate is a low 4.1%, the government reported Friday, even with hurricanes and a strike at Boeing having sharply depressed net job growth last month.

Instead, the central bank is lowering rates as part of what Powell has called “a recalibration” to a lower-inflation environment. When inflation spiked to a four-decade high of 9.1% in June 2022, the Fed proceeded to raise rates 11 times — ultimately sending its key rate to about 5.3%, also the highest in four decades.

But in September, year-over-year inflation dropped to 2.4%, barely above the Fed’s 2% target and equal to its level in 2018. With inflation having fallen so far, Powell and other Fed officials have said they think high borrowing rates are no longer necessary. High borrowing rates typically restrict growth, particularly in interest-rate-sensitive sectors such as housing and auto sales.

“The restriction was in place because inflation was elevated,” said Claudia Sahm, chief economist at New Century Advisors and a former Fed economist. “Inflation is no longer elevated. The reason for the restriction is gone.”

Fed officials have suggested that their rate cuts would be gradual. But nearly all of them have expressed support for some further reductions.

“For me, the central question is how much and how fast to reduce the target for the (Fed’s key) rate, which I believe is currently set at a restrictive level,” Christopher Waller, an influential member of the Fed’s Board of Directors, said in a speech last month.

Jonathan Pingle, an economist at Swiss bank UBS, said that Waller’s phrasing reflected “unusual confidence and conviction that rates were headed lower.”

Next year, the Fed will likely start to wrestle with the question of just how low their benchmark rate should go. Eventually, they may want to set it at a level that neither restricts nor stimulates growth — “neutral” in Fed parlance.

Powell and other Fed officials acknowledge that they don’t know exactly where the neutral rate is. In September, the Fed’s rate-setting committee estimated that it was 2.9%. Most economists think it’s closer to 3% to 3.5%.

The Fed chair said the officials have to assess where neutral is by how the economy responds to rate cuts. For now, most officials are confident that at 4.9%, the Fed’s current rate is far above neutral.

Some economists argue, though, that with the economy looking healthy even with high borrowing rates, the Fed doesn’t need to ease credit much, if at all. The idea is that they may already be close to the level of interest rates that neither slows nor stimulates the economy.

“If the unemployment rate stays in the low 4’s and the economy is still going to grow at 3%, does it matter that the (Fed’s) rate is 4.75% to 5%?” said Joe LaVorgna, chief economist at SMBC Nikko Securities, asked. “Why are they cutting now?”

With the Fed’s latest meeting coming right after Election Day, Powell will likely field questions at his news conference Thursday about the outcome of the presidential race and how it might affect the economy and inflation. He can be expected to reiterate that the Fed’s decisions aren’t affected by politics at all.

During Trump’s presidency, he imposed tariffs on washing machines, solar panels, steel and a range of goods from China, which President Joe Biden maintained. Though studies show that washing machine prices rose as a result, overall inflation did not rise much.

But Trump is now proposing significantly broader tariffs — essentially, import taxes — that would raise the prices of about 10 times as many goods from overseas.

Many mainstream economists are alarmed by Trump’s latest proposed tariffs, which they say would almost certainly reignite inflation. A report by the Peterson Institute for International Economics concluded that Trump’s main tariff proposals would make inflation 2 percentage points higher next year than it otherwise would have been.

The Fed could be more likely to raise rates in response to tariffs this time, according to economists at Pantheon Macroeconomics, “given that Trump is threatening much bigger increases in tariffs.”

“Accordingly,” they wrote, “we will scale back the reduction in the funds rate in our 2025 forecasts if Trump wins.”

Source: AP

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JPMorgan

Economic

Bond

Bond investors have grown accustomed to higher interest rate volatility with October providing another gentle reminder. Since the Fed’s jumbo 50 basis point rate cut in September, U.S. 2-year and 10-year Treasury yield have risen by 54bps and 59bps to 4.15% and 4.29%, respectively. This move is somewhat counterintuitive given yields tend to drift lower during cutting cycles and the yield curve steepens driven by falling short rates, not rising long rates. Moreover, the MOVE Index, which tracks rate volatility, also hit its highest level year-to-date. So, what’s behind the recent rise in rates and volatility?

Key factors to consider include:

Increased odds of a Republican sweep:

Since early September, betting markets have been pricing in a higher probability of a former President Trump victory. While the presidential race remains a close call, a full Republican sweep becomes more likely given the cards are stacked against the Democrats in the Senate and a commanding victory in the electoral college likely tilts the House to swing in favor of a Republican majority. Given this, long-end yields have risen due to expectations of additional tariffs and higher deficits assuming the expiring provisions in the 2017 Tax Cuts and Jobs Act are extended1 under a full Republican government.

Recession fears easing:

Recent data indicate a higher probability of a soft landing. The September payrolls showed a strong 254K payroll increase, reducing labor market slowdown fears. Retail sales also grew a robust 0.4% in September, and 3Q24 GDP increased by 2.8% q/q saar fueled by strong consumer spending.

Taken together, the recent rise in yields has led to modest core bond performance at just 2% year-to-date. However, over a 1-year period, core bonds are up 11%. All things considered, we anticipate the 10-year yield stabilizing between a range of 3.75%-4.25% over the next 12 months as the Fed progresses with its rate cutting cycle and U.S. economic growth moderates. However, fiscal challenges could keep long-term rates elevated, particularly after the election if policy outcomes worsen future deficit projections more than anticipated.

With our base case of a soft landing, short rates are likely to be biased lower given declining policy rates, reducing the appeal of cash-like instruments. Investors should consider intermediate-duration fixed income in quality sectors to lock in attractive yields and prepare for various political and economic scenarios. Shorter term corporate bonds across the credit quality spectrum also look appealing given overall yields, and while spreads remain tight, declining default rates and low near-term recession risk should keep spreads tight for longer. Why Are Yields Moving Higher?_1

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SAXO

Economic

Political

US Election Countdown: Is Harris Set for A Strong Win?_1

This week: Why have Trump’s odds to win dropped so sharply? Also: one market everyone needs to watch after the election.

Something strange has happened over the last week in the US election season: while the polls have continued to supposedly show an ever-tighter race, the betting markets took a hard turn away from Trump and toward Harris, with some prediction markets now even giving Harris better odds than Trump of winning.

This week, we look at what is behind that shift and why Harris may perform far better in this election than most believed likely. Separately, we also look at one market that is flashing a warning signal and should concern everyone, particularly if it doesn’t calm down after the election.

Trump’s winning odds collapse - why?

In recent weeks, we looked at how the betting odds and even financial markets were increasingly betting on a second Trump administration and even a Republican sweep of Congress that would deliver “Trump 2.0”. Then betting odds suddenly started shifting against Trump’s favour over the last week. Markets that had risen on anticipation of a Trump 2.0, like small cap stocks, cryptocurrencies, and even Donald Trump’s own Trump Media & Technology Group, have also fallen. What was behind this shift? First, the betting odds were suspect in the first place, as several accounts placed identical and very large pro-Trump bets. Now, some arguably “smarter money” has come in recently because the odds had become too skewed in favour of Trump. But if that money is smart, then it must be smarter than the polls, which supposedly show that this race is only getting tighter with every passing day, and we’re all supposed to believe that the closer the popular vote, the easier it is for Trump to win because of the Electoral College system. So that smart money must know something else: could it be signs that Harris has a much better chance of victory in this election? Let’s look into why that might be the case.

How could Harris win and by a stronger margin than most polls predict?

There are two reasons why we might get not only a Harris victory, but one that is a bit stronger than most would have thought likely.

The pollsters have messed up again. After the polls got things so wrong in 2016 and 2020 (confusing me badly as well, particularly in 2020), this time I have more closely followed discussions among the more insightful and well-connected political commentators and polling researchers on what they are seeing on the ground. In particular, the polling researchers’ discussion of the general paranoia among pollsters at under-estimating Trump, which was especially bad in 2020, suggests that they may have over-corrected and may be over-estimating his strength. This was seen in the 2022 US mid-term election results as well, where the polling overestimated Republican strength.

Surprising turnout patterns among actual voters. No matter how hard they try, pollsters can’t get an accurate reading of what kinds of voters will end up being the most motivated to actually get out and vote. In this election, I suspect that the decisive difference will be women who are reacting against Trump’s persona and the 2022 changes in US abortion law made by Supreme Court judges he appointed. Polling shows that voting differences by gender are the largest ever measured, with women favouring Harris and men favouring Trump. And recent election shows that women are far more likely to vote than men, especially among younger voters.So if women show up in far greater numbers than men, Harris could win a surprisingly strong victory, although the odds of the Democrats taking the Senate and therefore winning a “Democratic sweep” are still probably low unless the polls are badly off-base. A Harris presidency with a divided Congress is the most “low energy” outcome for financial markets, as it brings the least potential for big policy moves. That might be big relief for one market that is currently flashing red: the US treasury market.

US Election Countdown: Is Harris Set for A Strong Win?_2

The chart above shows an ETF that holds US treasury notes that mature in 20 or more years.

US Treasury notes are US sovereign bonds issued by the United States government. If interest rates rise, the prices of bonds fall, as does the price of this ETF. In fact, holders of this ETF have last more than 35% over the last three years. While the US central bank, the Federal Reserve or “Fed”, sets the rate for short-term borrowing, longer treasury yields are set more by market forces. Interesting to note that the recent high point for long-term bonds (or the recent low in yields) in mid-September occurred on the very day that the Fed started cutting rates for the first time since the pandemic, chopping 0.50% off the short-term borrowing rate. Why? Could this be the market telling us that it is concerned that the Fed is worried more about ensuring that the government can afford to service its debt rather than setting rates appropriately to the levels of inflation and economic growth in the economy? Or was the fall in bonds, or rise in yields, mostly related to the surprising resilience of the US economy? Or how much of the weakness in the bond market had to do with the sharply rising odds from early October of Trump winning the presidency and bringing tax cuts that worsen already massive US deficits? It’s very hard to know the answer – but getting to the other side of the election will make us much wiser on why the US bond market has been so weak and whether it will remain a source of concern for all markets.

The US treasury market and the US election

A couple of weeks back, when the odds of a Trump victory were rising strongly in betting markets, many observers noted that the markets appeared to be positioning for a Trump presidency and that the sharp rise in US treasury yields was one of the signs of that, as a Trump 2.0 presidency would mean much larger deficits after a new round of Trump tax cuts. Trump’s odds of winning have dropped significantly over the last week, but US Treasury yields continued to surge into the end of last week, even if the situation cooled early Monday. This makes it less clear that the rise in yields has mostly to do with the election and perhaps as much to do with Fed policy and the backdrop of enormous and rising US debt levels.

Regardless, interest rates are critical to follow for all investors when they are flashing red as they are now. Getting to the other side of the election tells us (and the new president) whether the bond market will remain weak or breathe a sigh of relief – for example on a “gridlock” scenario, in which the president’s party does not have control of both houses of Congress.

The US treasury market is the centre of gravity for global markets, and the world can’t afford a weak treasury market, which not only weakens bond markets globally, but can drive uncertainty and volatility in equity markets as well because it impacts stock valuations. And there are no easy solutions to bringing order to a chaotic bond market, either. Big cuts in government spending to shrink the deficit would tank the economy, while Fed intervention to bring order could blast the US dollar lower and worsen inflation. The bond market will be priority number one for markets and for the incoming president if it doesn’t shape up post-election.

Brace for impact

That’s it for this week. If the election is tilting more aggressively in favour of either candidate than the polls suggest, markets may begin reacting within a couple of hours of the polls closing in the first big states in the east, starting at mid-night Tuesday night, GMT time. If things are nail-biting close, we may not know the full picture until closer to the weekend.

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Warren Takunda

Economic

The US presidential election is set to drive significant market volatility this week, as investors brace for risk hedging and position adjustments depending on the outcome.

However, once the results are in, market attention is likely to shift back to economic events, such as the Federal Reserve (Fed), Bank of England (BoE), and Reserve Bank of Australia (RBA) rate decisions. Additionally, Chinese economic data, including new yuan loans and inflation readings, will be in focus.

Europe

With limited data releases in Europe this week, global events are expected to be the primary force influencing European market trends.

On Monday, S&P Global will publish final manufacturing PMI figures for October from major Eurozone economies, including Spain, Italy, France, and Germany.

Preliminary data indicated ongoing contractions in most countries' manufacturing sectors, with Germany's activity being the weakest. Spain, however, stands out as the strongest, with manufacturing activity expanding since March.

Services PMIs will follow on Wednesday, where growth is expected across most countries for October. France, though, is an exception, with services activity contracting for a second month amid an Olympic-linked economic cooldown.

The weak economic backdrop may continue to pressure the euro against the US dollar, despite a rebound last week.

Election-related dynamics could lend support to the dollar, compounded by persistent economic weaknesses in the eurozone. If signs of stability in the US economy emerge, the dollar may strengthen further.

In the UK, the BoE is expected to reduce its interest rate by 0.25%, bringing it to 4.75%. This would be the second rate cut this year, following September's year-on-year headline inflation decrease from 2.2% to 1.7%.

Nonetheless, the bank may adopt a hawkish tone given last week's Budget, which is likely to push inflation higher due to considerable tax increases. However, the US election's impact could prompt the BoE to manage political risks with a rate cut this week.

United States

The US election remains too close to call, with opinion polls indicating an exceptionally tight race between Trump and Harris.

Last week, signs of the Trump Trade unwinding emerged as gold, the dollar, and cryptocurrencies retreated from recent highs.

However, a Trump re-election could see this trend reverse. Conversely, a Harris victory may prolong the unwinding, causing the dollar to fall.

Some analysts believe that prevailing market trends may revert once the results are known, as certainty could prompt the rebalancing of hedged positions. In any case, volatility seems assured, as seen by the CBOE Volatility Index reaching a four-month high.

The Fed is also set to announce its rate decision after the election, adding to market volatility. It is expected to reduce rates by 0.25% despite last Friday's weaker-than-expected job report.

Unless there any election surprises or post-election developments that raise concerns about US economic growth, the Fed is unlikely to alter its stance. A relatively hawkish Fed would underpin a strong dollar and be likely to support the US stock markets.

Asia-Pacific

In the Asia-Pacific region, the RBA is anticipated to hold interest rates steady at 4.35% after last week's inflation data. Australia's headline inflation cooled to 2.8% in Q3, and 2.1% for September, within the 2-3% target range.

However, the RBA is expected to prioritise quarterly over monthly data, maintaining current rates. Markets anticipate the RBA could begin easing early next year, lowering expectations of a December cut.

In China, reports are due on new yuan loans, CPI, and PPI for September. The consensus forecasts a decline in bank lending to 770 billion yuan (€99.6bn) from August's 1.6 trillion yuan.

Inflation is anticipated to continue a mild year-on-year rise of 0.3%, while PPI is expected to fall by 2.5%, marking a two-year contraction despite ongoing stimulus efforts.

Source: Euronews

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ING

Economic

Forex

USD: Trump trades being unwound after latest polls

US election week is starting with a weak dollar across the board. Markets are still digesting the very soft payrolls numbers on Friday, which were highly affected by extreme weather events. Meanwhile, the latest polls suggest that the Democrats have regained some momentum in some swing states may have prompted some unwinding of Trump trades. Incidentally, a recent poll suggests that Kamala Harris is leading in Iowa, previously considered a red-leaning state.

The average polls collated by ABC’s ”fivethirtyeight” signal that Donald Trump is ahead in all swing states except for Michigan and Wisconsin, but by less than 0.5% in Nevada and Pennsylvania. Assuming Harris secures all blue lock/lean states (226 electoral college votes), then winning Michigan, Wisconsin and Pennsylvania would be exactly enough to get to 270 votes and get elected. Iowa, should it flip to the democrats, may not make much of difference given it only grants six electoral votes (versus 19 for Pennsylvania). Our latest note on FX and the election can be found here.

Polling stations open tomorrow morning, and by 9:00pm ET/2.00am GMT polls will have closed in all swing states (Arizona, Georgia, Wisconsin, Pennsylvania, Michigan, Nevada, North Carolina). Markets will start moving early as counting starts, but expect delays due to the large number of mail-in ballots and potential electoral disputes. There is a chance the outcome of the election won’t be called before a few days; in 2020, the Associated Press declared Joe Biden the winner only on Saturday.

Despite some unwinding of Trump trades, asset markets are still broadly pricing in a Trump win. As things stand now, we expect the dollar to sell off if Harris wins, while the impact of a Trump win may depend more on the Congress composition. A Republican clean sweep can send the dollar higher, but probably by less than how much a Harris win could hit USD. The dollar might not rally at all if Trump wins but Democrats secure the house.

Another big event this week is the Federal Reserve's rate announcement on Wednesday. By then, the election results may have not been called yet, meaning the FOMC market impact could prove rather short-lived. As discussed in our FOMC preview, the Fed should cut by 25bp regardless of the US election result. Had it not been for the proximity of the vote, we would have argued a Fed cut would have been net-negative for the dollar, but the implications for FX of this Fed decision will only be assessed once the election volatility has dimmed down.

Expect volatility in USD crosses today and tomorrow as FX liquidity may tighten and large hedging positions may be re-assessed on the back of latest sentiment on the vote. Today’s momentum seems to be pointing to a weaker dollar, but things can turn rapidly in intraday trading. We retain a bias for a stronger USD today and tomorrow from this morning levels.

EUR: Boosted by weaker dollar

EUR/USD is back up this morning after a rollercoaster ride on Friday as US payrolls were released. This week will all be about the US election with probably very little contribution by the eurozone calendar.

The US election implications for the euro aren’t only related to the dollar reaction. Markets have scaled back some European Central Bank dovish bets after the latest eurozone growth and inflation numbers, but probably remain open to pricing back in the chance of a 50bp December cut should Trump win this week. The rationale there is that the ECB will be more inclined to frontload easing given the risk of protectionism under Trump. At the moment, markets are pricing in 29bp of easing in December and an additional 30bp in January, which signals some residual bets on outsized cut remaining in place.

EUR/USD has briefly traded above 1.0900 this morning on the back of broad-based USD weakness. Pre-election volatility is dominating, but the still-wide rate differentials suggest the pair is expensive at these levels.

Elsewhere in Europe, we have seen EUR/NOK test our 12.0 near-term target, which likely mirrors some deterioration in FX liquidity conditions ahead of the US vote. The krone’s weakness will likely keep Norges Bank a hawkish outlier this week, with markets pricing in no risk of a cut at the Thursday meeting. Another development in the Nordics is the Riksbank meeting (also on Thursday). As per our preview note, we expect a 50bp in line with consensus and market pricing, and see only a severe post-US election SEK selloff potentially tilting the balance to 25bp.

GBP: Calm restored

Friday’s session seemed to signal that some calm has been restored in the gilt market, and that favoured a EUR/GBP decline back below the 0.8400 mark. Our short-term fair value model shows a rather modest risk premium of around 0.6% in EUR/GBP at the moment. As discussed last week, the pound and gilt markets are unlikely to face a rerun of the post-2022 mini budget crisis, but some gradual repricing higher in gilt yields on the back of wider expected borrowing can still weigh on the pound along the way.

On Thursday, the Bank of England announces policy and a 25bp is widely expected. Markets will probably be more interested in hearing what the MPC has to say about last week’s budget. While the Office for Budget Responsibility sees the announced fiscal measures are both pro-growth and inflationary, our UK economist does not expect them to significantly alter the BoE’s view.

For now, Governor Andrew Bailey may focus on the recent drop in services inflation and could try to drive the attention away from the budget and back to data. That could be read as a dovish signal for BoE rate expectations, and there is probably room for more easing to be added to the GBP swap curve, which is currently pricing in 32bp over the next two meetings. A dovish repricing can weigh on the pound this week, but should it also come with some lower long-end gilt yields, some inflows into sterling markets can offset selling pressure on GBP.

CEE: Central bank decisions in the shadow of the US election

While the main focus this week will clearly be on the global stage, the calendar in the CEE region is also busy. After Friday's public holidays, we will see delayed PMIs in Poland and Hungary. Friday's numbers from the Czech Republic showed a surprising improvement and we could see a similar improvement today. October inflation numbers in Turkey have already been released this morning, showing another drop from 49.4% to 48.6 % year-on-year, slightly above market expectations (48.3%).

On Wednesday, we will see the National Bank of Poland's decision to leave rates unchanged at 5.75% and the governor's press conference a day later. Industrial production numbers for the Czech Republic and Hungary will also be released. The Czech National Bank meets on Thursday and we expect another 25bp rate cut to 4.00%. At the same time, the central bank will unveil a new forecast that should see some dovish revisions. The National Bank of Romania will wrap up this week's central bank meetings on Friday. We expect no change at 6.50% in line with market expectations.

The FX market will be mainly driven by the US election this week. We expect currencies to remain under pressure today and tomorrow with low liquidity as in previous days. EUR/HUF remains vulnerable, having stabilised around 408 for the last few days, but we think the market will continue to push the pair up. On the other hand, the current rebound of EUR/USD may dampen it, which could somehow stabilise the CEE market ahead of the US election result. We see this week's central bank meeting slightly negative for the CZK and neutral for the PLN. However, all this will likely be overshadowed by post-election repricing.

For an immediate reaction after the election result, the main channel through EUR/USD is clear. We discussed the longer-term impact on CEE in our US election guide for the FX market. Although the bias here is clear and in general, the Harris scenario is positive for CEE and the Trump scenario negative for CEE currencies, against the market we believe the Trump scenario in the longer term is not necessarily that negative for the region and will depend on the details. However, for this week we believe our view will be best reflected in PLN/HUF. The pair did not move much in last weeks and the market moved short in both currencies (more in HUF). We believe that in case of a Trump win, HUF will be hit the hardest, while in the case of a Harris win, PLN will have an easier road to recovery.

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