Lars Christensen
Danske Bank A/S
Market movers today
Focus will be on the ECB meeting, although it is expected to be much less interesting than the latest meeting in January when the ECB announced its QE programme. Attention will be on further details about the programme and the publication of the Legal Act, which should follow this week before the purchases are expected to start on Monday 9 March. We believe the release should not have a major market impact, as the details announced in January were much clearer than we are used to when the ECB launches new measures, see ECB preview, 27 February 2015.
Bank of England should remain on hold at its meeting today. We still call for a hike in August as the economy continues to recover. Most importantly, the unemployment rate is approaching the medium-term equilibrium, wages are increasing and the historically low headline inflation is due mainly to the fall in commodity prices.
In terms of data release focus will be on German factory orders, which are expected to decline after a very strong reading in December.
Selected market news
This morning Chinese stock markets are trading down around 1% after China’s official growth target for 2015 was lowered to 7% - the lowest in 11 years. Even though the new growth target seems to be weighing a bit on the Chinese markets, it is hardly a surprise the Chinese growth has been disappointing for some time and the market consensus is already fairly bearish on Chinese growth. In the rest of Asia stock markets are also slightly down following the trend from yesterday’s US session, where the major US stock market indices fell moderately.
Yesterday, we got the important ADP report for the US labour market. The report showed that US private sector employment grew less than expected (212k versus an expectation of 220k) in January. The ADP numbers might – or might not – give an indication on what to expect from the ‘real’ US labour market report, which will be published on Friday.
In the currency markets the EUR continues to weaken ahead of today’s ECB policy announcement. This morning EUR/USD is trading well below 111. We expect the EUR to continue to weaken, as the ECB’s QE programme gets under way.
On Wednesday the Brazilian central bank once again hiked its key policy rate to curb inflationary pressures on the back of a weakening currency. Despite the rate hike the Brazilian real remains under pressure and the currency weakened more than 2%. The Brazilian central bank is stuck between a rock and a hard place as monetary tightening is pushing the economy closer to recession, while inflation has been heading higher.
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
AUD/USD rises to two-day high ahead of Aussie CPI
The Aussie Dollar recorded back-to-back positive days against the US Dollar and climbed more than 0.59% on Tuesday, as the US April S&P PMIs were weaker than expected. That spurred speculations that the Federal Reserve could put rate cuts back on the table. The AUD/USD trades at 0.6488 as Wednesday’s Asian session begins.
EUR/USD holds above 1.0700 on weaker US Dollar, upbeat Eurozone PMI
EUR/USD holds above the 1.0700 psychological barrier during the early Asian session on Wednesday. The weaker-than-expected US PMI data for April drags the Greenback lower and creates a tailwind for the pair.
Gold price cautious despite weaker US Dollar and falling US yields
Gold retreats modestly after failing to sustain gains despite fall in US Treasury yields, weaker US Dollar. XAU/USD struggles to capitalize following release of weaker-than-expected S&P Global PMIs, fueling speculation about potential Fed rate cuts.
Ethereum ETF issuers not giving up fight, expert says as Grayscale files S3 prospectus
Ethereum exchange-traded funds theme gained steam after the landmark approval of multiple BTC ETFs in January. However, the campaign for approval of this investment alternative continues, with evidence of ongoing back and forth between prospective issuers and the US SEC.
Australia CPI Preview: Inflation set to remain above target as hopes of early interest-rate cuts fade
An Australian inflation update takes the spotlight this week ahead of critical United States macroeconomic data. The Australian Bureau of Statistics will release two different inflation gauges on Wednesday.