Signe Roed-Frederiksen
Danske Bank A/S
Market Movers
Only tier 2 data will be released today ahead of an otherwise busy week with US retail sales on Wednesday, US CPI on Thursday, Chinese September trade data and the German ZEW on Tuesday.
The most important events today will be the speeches by Fed President Lockhart (voter, neutral) and Fed board member Brainard (voter, neutral).
US bond markets are closed due to Columbus day.
We expect Danish inflation to rebound in September.
Selected Market News
New York Fed President Dudley said on Friday that he still sees a December lift-off as his base case but that this is conditional on his economic forecasts coming true and that there are risks to these. FOMC Vice Chair Fischer echoed this message at the IMF meeting over the weekend. He stated that at the September FOMC meeting most members of the FOMC thought that lift-off later this year was appropriate, but that the Fed is monitoring slower domestic job growth, the previous two job reports have been ‘disappointing’ and international developments would decide the exact timing of lift-off. We expect the Fed to deliver the first rate hike in January next year.
In an interview with the Greek newspaper Kathimerini on Saturday, ECB President Draghi said that the QE programme undertaken by the ECB has worked better than expected. He also said that while it looks as though it will take somewhat longer for inflation to return to 2%, this is largely caused by the drop in oil prices. We expect the ECB to extend the current QE programme, but at the December ECB meeting at the earliest, and possibly not until next year.
The Chinese Yuan is now trading at its strongest level since the change of currency regime two months ago. The PBOC raised its fixing on Monday by 0.14 percent to 6.3406 and the currency has strengthened further in today’s trading.
The stock markets continued the positive trend in the US and Europe on Friday and this morning Asian bourses have extended last week’s rally led by strong gains in Chinese shares. US treasury markets held broadly stable at the end of Friday and with a slightly flatter 2-30 curve. EUR/USD has moved higher and the EUR is now at its strongest against the USD since mid-September. Oil prices have held on to their gains from last week.
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