Jens Nærvig Pedersen
Danske Bank A/S
Market Movers
Based on the lower German HICP inflation figure, we have revised our euro HICP inflation forecast for December down to 0.3% y/y (from 0.5% y/y) and still up from 0.2% y/y in November. The downward revision reflects that we had expected food prices to increase, while we also expected a smaller impact from the oil price decline, as gasoline prices have remained somewhat resilient to the latest oil price decline. Our lower euro HICP inflation forecast also follows as the Spanish figure, which was released last week, was weaker than expected despite an increase of 0.3pp
Financial markets will keep an eye on the rising tensions between Saudi Arabia and Iran, which could raise concerns about a potential oil supply disruption.
In Denmark, Danmarks Nationalbank is scheduled to publish December’s FX reserve today at 16:00 CET. See Scandi markets, page 2.
Selected Market News
Financial markets got off to a rough start to the year following a disappointing Chinese manufacturing PMI release and rising tensions between Saudi Arabia and Iran, raising concerns of the combination of a further slowdown in Chinese economic growth and a potential oil supply disruption. Consequently, equity markets in Europe and US declined 2-3%, crude oil prices temporarily rose as much as 4% yesterday and the gold price increased more than 1%.
Fed officials Mester and Williams spoke yesterday and both dismissed market turmoil as a concern for US economic growth, which both expect to be sound this year. Furthermore, Williams said that he expected the Fed to hike three to five times this year.
The People’s Bank of China conducted its largest reverse repurchase operation since September 2015 earlier today in order to add liquidity to the market cap and upward pressure on money market rates.
On a local note, the Riksbank yesterday announced that it has taken the decision formally to be able to instantly intervene in FX markets if necessary. This should be seen as a complementary monetary policy tool to the preferred tools, i.e. interest rate and bond purchases. The Riksbank thereby further underscores its commitment to reaching its inflation target and signals to markets that it will not allow a SEK appreciation to jeopardise this task.
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.