Market movers today
There is no tier 1 data out today, although DKK CPI is due out this morning, where we expect a further decline to 0.3% from 0.6% in June (see page 2), so focus will continue to be on political risks from the US-China trade war and the political situation in Italy.
Later this week attention turns to German ZEW (Tuesday), US core inflation (Tuesday) and Chinese data on industrial production and retail sales (Wednesday).
Markets will also keep a close eye on any policy signals from Fed and ECB members following the recent market turmoil and escalation of the trade war.
In the Scandies, Swedish inflation data is due for release (Wednesday). The Norges Bank meeting (Thursday) will give more guidance on the outlook for rate hikes.
Selected market news
In Germany, discussions regarding the government's 'schwarze Null' policy, essentially committing the German state to a balanced budget at all times, continued over the weekend, with German defence minister Annegret Kramp-Karrenbauer defending the measure in an article in Welt am Sonntag , while members of the Bundestag from both the SPD and Die Grüne were asking for more public investments. The debate comes after a week when a government source said that the finance ministry was currently reviewing its funding options ahead of an upcoming climate package with costs reaching EUR30bn, which could see the 'schwarze Null' policy violated. The debt brake was introduced in 2009 and prohibits Germany's Länder from running a budget deficit and limits the structural deficit of the federal government to 0.35% of GDP. The measure has been popular so far among voters, but questions were raised already in the spring; however, mostly from academics, where discussions went along the lines of the nominal interest rate of debt being below the nominal growth rate of GDP, implying that the debt burden to future generations from raising new debt will be manageable under this condition. For now, however, it seems all coalition partners remain fixed on 'die schwarze Null'. The discussions should be seen as part of a more fundamental shift and willingness among Europe's political leaders to embark on financial stimulus in a scenario of potentially impotent monetary policy measures, with Germany being one of the few countries able to do so.
Japanese 10-year yields (-2bp to -0.22%, thus below the lower bound of the target range of the Bank of Japan (BoJ)) continues their decline despite the BoJ cutting long-end purchases, in a bid to steepen the yield curve, as well as a surprisingly strong Q2 GDP figure last week. The outlook for the Japanese economy is dimming and the continued flattening of the curve reflect the markets' expectation of further QE.
The People's Bank of China (PBOC) continues to signal an orderly depreciation of the yuan with another fixing in line with expectations. In a statement over the weekend, the PBOC also indicated a further opening of the bond market including improving overseas access to the repo market.
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 drops below 1.0800 after German Retail Sales data
EUR/USD has come under fresh selling pressure and trades below 1.0800 after the data from Germany showed that Retail Sales declined by 1.9% MoM in February. Resurgent US Dollar demand is adding to the downside in the pair. US data are next in focus.
GBP/USD stays weak near 1.2600 amid market caution
GBP/USD remains defensive near 1.2600 in European trading on Thursday. The hawkish tone from Fed Governor Christopher Waller keeps the US Dollar afloat amid a cautious trading environment ahead of key US data releases and the Good Friday trading lull.
Gold price bulls keenly await US PCE Price Index on Friday before placing fresh bets
Gold price (XAU/USD) continues with its struggle to make it through the $2,200 mark on Thursday and oscillates in a narrow trading band through the early part of the European session.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
The other terminal rate: How far will policy rates be cut?
Recent communication by the Federal Reserve and the ECB has made it clear that the first cut in official interest rates is coming. Both central banks are saying the same but the ECB communication is more opaque than that of the Fed.