• Markets:

    −EUR/USD dropped more than 1.3% yesterday, the most since July, as ECB President Mario Draghi successfully managed to verbally intervene and talk money market rates and the euro down. For the first time the ECB specifically mentioned the exchange rate as a downside risk to inflation. Draghi’s comments also indicate that a rate cut could be relevant if the euro continues to appreciate at a too rapid pace. Hence, in the near term we could see euro money market rates declining a bit more which might put some pressure on the euro and a near term test of EUR/USD in 1.40 clearly is less likely given the dovish tone from Draghi yesterday. However, there are still several factors supporting the euro, such as continuing global recovery, more safe-haven flows back in the euro and other major central banks still favouring a historically loose monetary policy, and we expect EUR/USD to continue its uptrend in the coming months. Hence, clients should utilize the euro setback to hedge income/assets in USD, GBP and JPY.

    −This morning, Scandies are in focus with a series of data releases from Sweden and Norway. Overall, Norwegian numbers were generally in line with expectations while Swedish data once again surprised to the upside. Industrial production in Sweden rose 1.3% m/m SA (consensus expectation was 0.2%) and orders rose 7.7% m/m. Today’s strong industrial data are line with last week’s dramatic spike in PMI which jumped to 49.2 from 44.6 lead by production, orders and inventories. These data coupled with better labour market statistics released earlier this morning (layoffs down from last year's peak and vacancies rising sharply) have further reduced the case for a Riksbank rate cut.