Danske Research Team
Danske Bank A/S
Market Movers
The calendar of economic data releases is relatively thin today.
In the UK industrial and manufacturing production and construction output in November are due. The figures should give us more insight into how the UK performed growth-wise in Q4. We think GDP growth picked up in Q4 following the slowdown in Q3.
In the US a large number of Fed members are speaking this week. The time after the FOMC meeting in December has been quiet due to Christmas and the New Year, so not much information from the Fed members has come out yet. Remember, as the calendar now says 2016, voting rights have changed. Among the speakers today are Fischer (voter, hawkish) and Lacker (non-voter, hawkish).
Also in the euro area focus will be on monetary policy communication as ECB’s Praet is set to take part in a panel discussion in Paris and as Lautenschläger has a scheduled speech in Frankfurt. Noteworthy, the two Executive Board members have previously expressed opinions in each end of the ECB board-spectrum.
Selected Market News
Market focus is still very much on the oil price and on developments in China.
At a Chinese consulate briefing to the US, the deputy director of China’s office of the central lending group Han Jun stated that calls for a large CNY depreciation in 2016 are ‘ridiculous’, that shorting the yuan ‘will not succeed’ and that ‘it is pure imagination that the Chinese yuan will act like a wild horse without any rein’. Jun’s comment come amid yuan lending rates in Hong Kong reaching record highs on the back of tight liquidity, which is likely a result of intervention in the offshore market by the People’s Bank of China to stem CNH depreciation. As a result the CNY-CNH spread has now been closed again after reaching a record 2.9% last week. Also USD/CNY this morning fixed at 6.5628 marking the third consecutive day of stable CNY fixing.
Meanwhile the oil price continues to slide. Yesterday the price of the black gold dropped for a seventh consecutive day, thereby reaching the lowest level in 12 years. While we fundamentally stick to the story that the oil price will eventually rebound this year, shortterm risks clearly remain skewed to the downside.
Fed’s Lockhart (non-voter, neutral) yesterday expressed the view that it is important for the Fed to keep a focus on the real domestic economy – rather than the financial economy - and that he currently does not view the US economy as vulnerable to the foreign shocks that have given US stock markets a historically bad start to the new year.
In Japan, balance of payment figures released overnight revealed the 17th consecutive month of a current account surplus.
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