Danske Research Team
Danske Bank A/S
Market movers today
-
While the majors calendar is very thin, today marks another Scandi inflation day with the monthly inflation release in Sweden due. We expect both CPI and CPIF to print 0.2pp below the Riksbank's forecast, marking the beginning of our inflation forecast divergence. For more details see the Scandi Markets section.
-
In the US, weekly jobless claims data are due. While a volatile series, markets will look for a reversal following last week's highest print in five weeks, albeit the four-week moving average still points to a strong US labour market.
Selected market news
In Norway, the NOK has rallied significantly following yesterday's much higher-than-expected inflation release (core measure jumping from 3.1% y/y to 3.7% in July). Overall, the print see inflation return as a key factor in the Norges Bank's rate setting calculations amid a prolonged shift of focus towards domestic growth and employment. Indeed, yesterday's print alone should (from a historical perspective) lift Norges Bank's rate path in September by close to a full hike (25bps) which is why a substantial amount of rate cut expectations has been priced out in NOK rates. On the other hand, the Nibor-policy rate spread widening alone would counter this effect. Moreover, the move in NOK, which is now also marginally stronger than-expected, should also have a marginal negative effect on the rate path. This leaves a very tight housing market (especially in Oslo) on the one hand, but also a lower oil price and the uncertainties related to the spill-over effects from Brexit. Finally, it is key to remember that in June Norges Bank signalled a '100% probability' of a cut under a Bremain scenario. All in all, yesterday's inflation print makes the coming month's data highly decisive but at this stage we still think it is too early to rule out a September cut.
Overnight, the UK's RICS housing market survey for July showed a rebound in the expectations index for the next three months. Yet the survey – usually quite a good indicator – still points to a sharp decline in both housing market activity and prices.
In the August Bank of England agents' summary, UK company respondents turned more negative on the business outlook than in the July survey that covered only a small post-Brexit period. Specifically, the respondents stated that "the result of the EU referendum would have a negative effect, overall, on capital spending, hiring and turnover over the coming year". The manufacturing sector notably reported that the exports decline had been halted by the GBP depreciation.
After Tuesday's gilt purchase shortfall, the Bank of England (BoE) yesterday reported that the bank intends to cover the relatively small gap-to-target at a later stage as it made no changes to its revived government bond purchase programme of GBP60bn. The failed reverse auction had led to speculation that the bank could run into trouble finding sufficient bonds to buy, albeit thin summer liquidity was arguably a factor. Meanwhile, yesterday's gilt operation was fully covered.
As expected, the Reserve Bank of New Zealand cut the cash rate by 25bp to a record low of 2.00% while signalling more easing to come. As rates markets had priced a 20% probability of a 50bp cut at yesterday's meeting, the NZD rose on the release with NZD/USD up c. 0.75% at the time of writing.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.