No changes to ECB’s forward guidance
|Market movers ahead
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We do not expect the ECB to change its forward guidance when it meets on Thursday next week but believe it will wait until the March meeting.
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In Norway, we do not expect new signals from Norges Bank but we think the likelihood of a rate hike in December has increased since the last meeting.
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The Bank of Japan meeting ends Tuesday morning and we expect no changes to monetary policy.
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Otherwise, we are due to get preliminary PMIs for January for the euro area and the US. Next week also sees the first estimate of GDP growth in the US and UK in Q4.
Global macro and market themes
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The 5Y point is the pivotal point on the EUR curve. This is right after the textbook and the normal pattern we see when monetary policy is about to change in either direction.
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While the 2Y5Y curve has steepened, the 5Y10Y curve has flattened. Also, the 10Y30Y curve has flattened, as long rates are already trading close to the 'neutral rate' in the eurozone – a curve dynamic close to the curve dynamics seen in the US since 2013.
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We expect to see an extension of the recent flattening of the EUR curve in 2018.
Focus
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Italian Election Factbook – The countdown has begun but ITExit risk remains low, 16 January.
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FX Forecast Update – EUR/USD now headed for high 1.20s – dips set to be shallow, 15 January.
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Yield Outlook – Risks to yields skewed on the upside but mainly on a 12M horizon, 17 January.
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