Eurozone preliminary CPI expected to fall to -0.6%yoy

Market movers today

• The new Greek prime minister Alexis Tsipras will meet with Jeroen Dijsselbloem who heads the euro-area finance minister group. The result of the meeting will be watched closely as markets fret over a potential confrontation between Greece and the Troika. Tsipras and finance minister Varoufakis have tried to calm markets in the past days by saying that there will not be a duel between Greece and the EU and that the aim is to reach ‘a viable, fair, mutually beneficial solution’.

• Another key focus will be the US employment cost index for Q4. The low print for hourly earnings in the December employment report has reinforced focus on US wage growth. The employment cost index is a more reliable indicator, though, and has been moving higher in the past quarters. If the employment cost index does not show the same decline in wage growth as the hourly earnings, we may see a negative reaction in the bond market.

• The preliminary euro inflation for January is expected to fall deeper into negative territory to -0.6% y/y after German inflation data yesterday surprised to the downside. The decline is mainly driven by lower energy prices. Core inflation is expected to stay unchanged for the third month in a row at the historical low of 0.7% y/y. Should it decline further it will highlight ECB's challenge to get inflation back towards the ‘just below 2%’ target.

• US GDP is likely to show a decent rise of 3.4% q/q annualised. This will mainly be pulled by a robust 4.4% q/q annualised rise in private consumption, whereas corporate investments and housing have likely been soft in Q4.

• Spanish GDP is released and is expected to show a solid rise of 0.6% q/q.

• Norwegian retail sales and unemployment are also released. See more on page 2.

Selected market news

Yesterday Danmarks Nationalbank (DN) cut the certificates of deposit (CD) rate by 15bp to a historical low of -0.50%. The cut was the third 15bp rate cut in less than two weeks and shows that the appreciation pressure on the DKK has continued even after several rate cuts. Although we are in an unusual situation, the reaction from DN has so far been business as usual: first intervention and then a rate cut. We cannot rule out DN having to cut the CD rate further into the negative, see DN cuts for a third time in lessthan two weeks.

In Japan the increase in CPI excl.-fresh food eased further in December to 2.5% y/y from 2.7% y/y in November largely on the back of lower energy prices. Industrial production rebounded and the unemployment rate also declined suggesting the Japanese economy continues to recover. Hence, Bank of Japan is in our view unlikely to respond with further easing in the coming months despite us expecting inflation to continue lower.

EU foreign ministers failed to agree on further economic sanctions against Russia at an emergency meeting in Brussels Thursday.