Market movers today
US initial unemployment claims are expected to indicate a continued improvement in the labour market. The current level of the initial unemployment claims has historically been consistent with monthly gains in non-farm payrolls exceeding 250,000 as reflected in the most recent non-farm payrolls for June.
The interest rate meeting in Bank of England is unlikely to offer significant news in terms of changes to its current monetary policy. Instead focus will be on the minutes from the meeting (released on 23 July), where we will see if there is some dissident vote among board members, advocating an earlier rate hike.
We estimate a monthly decline in France and Italian industrial production of 0.2% and 0.5% respectively. Given the series of negative surprises in industrial production data for June, notably in Germany and the UK, risks are probably tilted to the downside relative to our forecasts.
Selected market news
According to the FOMC minutes from the 17-18 June meeting released last night, the Fed will end its QE3 programme with a USD15bn taper in October barring any economic surprises. For the first time the Fed now signals a clear end-date for QE3 and while timing and pace of interest rate increases remain under debate, it seems highly likely that this will become a market theme later in H2.
The Fed also debated its ‘exit strategy’ and how it should communicate its future policy to financial markets. According to the minutes, ‘many’ Fed officials want to keep reinvesting income in their asset purchases until at or after the time that interest rates rise, which would be a change to the current strategy of stopping reinvestment before raising rates. Moreover, ‘many’ officials indicated a preference for continuing to express the target Federal Funds rate as a range when the Fed eventually starts to raise rates instead of giving a single number as it did in the past.
Scandi markets
In Scandinavia it is time for inflation data. Especially the Norwegian and Swedish inflation figures might attract some attention after the recent surprisingly dovish actions from both central banks.
Norway. We expect core inflation to have edged up to 2.4 % y/y in June, driven by higher growth in both domestic and imported prices. This is a bit lower than the recent forecast from Norges Bank in MPR 2/14 (2.65 % y/y) but should anyway confirm that core inflation in Norway is running at a ‘close-to-2.5%’ annual rate.
Sweden. Energy has temporarily been pushing CPIF up but we expect this effect to peak within the next couple of months and our month-on-month forecast for June is actually flat on CPIF and -0.1% on CPI.
Denmark. We expect CPI to increase 0.1% m/m and 0.7% y/y in June. In May, y/y inflation was pushed down by temporary factors but it seems likely to rebound in June. The big uncertain factor are food prices, which increased 0.5% m/m in May.
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