Jens Nærvig Pedersen
Danske Bank A/S
Market movers today
The combination of ECB’s QE announcement, a weaker euro and low oil prices should lift investor confidence and we expect the Euro Area Sentix Investor survey for February to surprise on the upside and increase to 4.0 in February from 0.9.
The Fed will release the January LMCI which should get a boost from Friday’s strong US labour market report (see US: very strong employment report, 6 February 2015).
German Chancellor Angela Merkel is to meet President Barack Obama in Washington today as Merkel will try to secure a diplomatic solution to the escalating Ukraine crisis. The visit comes after the latest round of talks between France, Germany, Ukraine and Russia failed to result in a peace accord at the weekend.
Monetary policy in Denmark and Danmarks Nationalbank will likely be in the spotlight today as downward pressure on EUR/DKK prevails. For more on Scandi markets see page 2.
Selected market news
Since lowering the key policy rate for the fourth time in three weeks on Thursday, governor of Danmarks Nationalbank (DN), Lars Rohde, has toured several domestic and international media departing from the DN norm of not commenting on monetary policy. The message from Rohde has been clear, DN stands committed to maintain the fixed exchange rate policy and has unlimited ammunition to do so. In our view, DN will outlast the present DKK appreciation pressure, albeit it will likely undertake additional FX intervention purchases to keep pace with ECB bond purchases and further restore credibility in the peg. A lower key policy rate or more controversial instruments, such as bond purchases, may also come into play.
Another 83 were slashed of the US oil rig count last week, leaving it at the lowest level since December 2011. The steep decline in the US oil rig count over the past couple of months signals that consolidation on the supply side in the oil market is under way. It has supported a recovery of the price for Brent crude to around USD58/bbl and more consolidation in combination with rising demand should lift the oil price further over the course of the year.
Chinese foreign trade data published this weekend disappointed, highlighting weak domestic demand. Last week the People’s Bank of China cut the reserve requirement (see China: PBoC cuts reserve requirement, but aggressive easing unlikely, 4 February 2015), which should support domestic demand going forward.
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