Today’s Comment
Today we will hopefully gain more insight into the EU’s position with respect to the problems relating to Greece. This morning, a press conference will be held in relation to the proposals submitted by Greece to the EU about the budget problems. The announcements today may potentially have a great impact on the EUR rate vis-á-vis the other G10 currencies. If the announcement is to the effect that the Greek proposal is not good enough, it is very likely that the uncertainty will drag on, which will have an adverse effect on the value of EUR. On the other hand, this will benefit the counter-balance to EUR, namely USD, and if so, it is unlikely that we will see 146 (USD/DKK 510) in the short term. Then, it may be more likely that we will see levels of 136-137 (USD/DKK 543-548).
A monetary-policy meeting will be held in Norway today. We anticipate that Norges Bank will this time keep its interest rate unchanged at 1.75%, and that the next interest-rate increase will not become a reality until at the monetary-policy meeting at the end of March. The central bank is walking on a tightrope since the housing market and consumers are doing reasonably well (the housing market perhaps even too well) whereas the manufacturing industry is lagging slightly behind and the relatively strong exchange rate does not have any favourable effect on this. At the time of writing 5-8 bps have been discounted, corresponding to a probability of approx. 25% of an interest-rate increase today. Therefore, there are prospects that the market may be slightly disappointed and that we may see minor setbacks for NOK. In the US, the sentiment indicator ISM service has not gone up quite as much as ISM manufacturing industry, and actually ISM service just managed to edge above 50 in December. Generally, we anticipate an increase in the sentiment indicator. PMI service in the UK stabilised with a marginal increase to 56.8 in December, and hence the index closed the year at a solid level. This is important since the service sector accounts for around ¾ of the UK economy. We anticipate that the sentiment indicator for the service sector will in January continue to stabilise around the December level.
Today’s key events
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10:28 PMI (GBP)
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11:00 Retail sales (EUR)
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14:00 Interest-rate announcement from Norges Bank (NOK)
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14:15 ADP employment report (USD)
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14:45 Press conference, Norges Bank (NOK)
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16:00 ISM Service (USD)
Today’s Chart – EUR/NOK
