Jens Nærvig Pedersen
Danske Bank A/S
Market Movers
In the euro area the most important event today is the German Ifo sentiment for May. The German surveys so far released for May including yesterdays PMIs have been softer suggesting that German growth is again cooling a bit. This should also be evident in today’s Ifo business climate, which we expect to have declined a bit more than the consensus estimate in May.
In the US the attention will mainly be on consumer prices for April. Focus should mainly be on core inflation, which has actually stabilised above 1.5% y/y in recent months. With at least some wage measures showing signs of a moderate pick-up in wage growth, Fed is probably less concerned about undershooting its inflation objective.
There is a number of important central bank speeches in the calendar today. ECB president Mario Draghi will address the ECB forum on Central Banking at 10:00 CET and ECB chief economist Peter Praet will chair an academic session on Unemployment and Inflation. It seems unlikely that Draghi and Praet will cover the operational issues in the QE programme that have been in focus in the financial markets in the past week. US Fed chairwoman Janet Yellen will this evening speak about the outlook for the US economy. She will probably repeat the message from Wednesday’s FOMC minutes that the slowdown in Q1 was most likely temporary but because of uncertainty it is difficult to give more precise guidance on the first hike except it is unlikely to be in June.
Selected Market News
Bank of Japan kept its target for the annual pace of increase in the monetary base unchanged at JPY80trn and thus refrained from adding further stimulus to the economy. Following two quarters of economic growth the central bank is looking for this positive spiral to pave the way for a further recovery of the economy and eventually push inflation back towards its target.
Negotiations about a solution to Greece’s debt woes yesterday between Germany, France and Greece ended without any clear indications that a deal to unlock bailout funds to Greece is close. Both sides noted that the talks were constructive and that significant progress had been made although issues remain.
The oil price inched back above the USD66/bbl level yesterday and thus looks to be anchored in the USD65-68/bbl range at the moment. Declining US inventories are supporting a higher oil price but abundant, more costly reserves ready to be produced at a higher price are limiting the upside potential for oil.
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