Danske Research Team
Danske Bank A/S
Market Movers
The main event today will be the ECB meeting. We do not expect any policy changes or new signals. Draghi is likely to continue to signal a firm commitment to continue the asset purchases until September 2016. Focus will be on a) the Greek situation, b) the frontloading of ECB purchases and how much flexibility there is in its purchases and c) a likely small lift to its inflation projection for 2015 following the rise in the oil price since the projections in March.
Final services PMI for the euro area will include data for Spain and Italy. The UK also releases services PMI, which is expected to be unchanged
ADP employment numbers in the US will give more input to Friday's payrolls number. The ADP data only cover private payrolls and are expected to show a rise of 200,000 in May, up from 169,000 in April.
US ISM non-manufacturing is expected to show a small decline to 56.0 (consensus 57.0). However, it follows a decent rise in April to a pretty high level of 57.8 (longterm average is 54.0) and is still in line with growth above trend in the service sector.
For more on Scandi markets see page 2.
Selected Market News
Greece’s creditor institutions (EU Commission, IMF and ECB) have reached a common footing in terms of a proposed deal to the Greek government. The creditors have finished a draft for the bail-out fund requirements that amounts to a take-it-or-leave-it offer which likely will be presented to Greek officials today. The proposal is expected to include higher demands for tough reforms of Greece’s pension system, labour laws as well as considerable budget measures to ensure that Greece runs a fiscal surplus before interest.
Amid the higher-than-expected euro-zone inflation prints yesterday, news/speculations of a Greece-creditor proposal drove large movement in core rates markets. The sell-off later spread to global debt markets and equity markets with most indices ending the day or currently trading (i.e. Asia) in red territory. The EUR has also strengthened significantly, in particular against the USD, which has seen EUR/USD jump more than 2% to a level above 1.1150.
US vehicle sales released last night surprised market estimates by reaching a 10-year high. The release supports our call for a Q2 rebound in US consumption growth after the disappointing Q1 and surprisingly weak April figures.
FX intervention figures yesterday showed that Danmarks Nationalbank purchased DKK in FX intervention for DKK35bn in May leaving the FX reserve at DKK658.9bn and accumulated intervention since the beginning of April at DKK68.9bn.
Australian Q1 GDP surpassed expectations at 0.9% q/q (consensus 0.7%).
FIFA President Blatter unexpectedly resigned amid a spreading corruption probe.
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 edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.