ECB’s Praet speak s at 11:45 CET

Danske Research Team Danske Bank A/S

Market movers today

In Norway, Norge s Bank’s gove rnor Olsen is making his annual addre ss at 18.00 CET, which will be interesting, not least as Norges Bank has made a U-turn from signalling further rate cuts to indicating a rate increase within a year (page 2).
In the US, we get PPI inflation data for January, which might attract more attention than usual after the higher-than-expected CPI inflation print released yesterday.
Also in the US today, we get production data for January and Empire and Philly regional manufacturing PMIs for February.
The Chinese financial markets are closed from today and until 22 February for the Lunar New Year.
ECB’s Praet speak s at 11:45 CET.

Selected market news

The US CPI was the highlight of data points yesterday. Overall the strong CPI core 1.8% yoy (close to 3% annualised in the last three months), supports the case for the Fed to move forward with further rate hikes. Albeit , retail sales were weaker than expected. Over the day as a whole, risk sentiment was supported despite an initial knee-jerk on the US CPI. Global equities rose across the board. Asian equities followed the pattern by rising 1-2% in the overnight session. S&P 500 rose 1.4% as eurostoxx rose 0.9%, while the volatility index VIX fell rapidly after the knee-jerk reaction to the US data and ended around 19.3. The yen strengthened again yesterday. The treasury yields ended the day 7bp higher at 2.90%.

South African now former president resigned yesterday with immediate effect . ANC leader Cyril Ramaphosa will replace Zuma.

Euro area Q4 growth was confirmed at 0.6% q/q as expected. The flash release of Germany and Italy were also released. German Q4 17 growth came in as expected at 0.6% q/q, mainly due to strong foreign demand and a pick-up in exports. This leaves annual growth in 2017 at 2.5% and we expect the German economy to continue running on all engines. The Italian Q4 growth disappointing slightly at 0.3% q/q after 0.4% q/q in the previous quarter, despite the high manufacturing PMIs. This leaves annual growth in 2017 at 1.5%.

Yesterday, the Riksbank chose to reduce inflation (in part icular CPIF ex energy due to lowerthanexpected wage increases) and GDP forecasts (now recognising that housing const ruction activity will decrease more than expected previously) while keeping the repo rate unchanged. We have elaborated with a base Riksbank scenario (no rate hikes this year) and a not improbable alternative scenario (one or possibly two hikes then a pause for a year or so). Admit tedly, it looks like a close call. That the Riksbank is sticking to the rate path despite lowering the inflation forecast could be taken as hawkish but , in our view this is not really vindicated by the policy report . This suggests that the Riksbank was close to delaying the first hike. For now, we stick to our base case as the most probable but the minutes published on Friday next week will be of the essence just like the coming inflation data.

Download The Full Daily FX Market Commentary

Author

Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

EUR/USD climbs to two-week highs beyond 1.1900

EUR/USD is keeping its foot on the gas at the start of the week, reclaiming the 1.1900 barrier and above on Monday. The US Dollar remains on the back foot, with traders reluctant to step in ahead of Wednesday’s key January jobs report, allowing the pair to extend its upward grind for now.

GBP/USD hits three-day peaks, targets 1.3700

GBP/USD is clocking decent gains at the start of the week, advancing to three-day highs near 1.3670 and building on Friday’s solid performance. The better tone in the British Pound comes on the back of the intense sekk-off in the Greenback and despite re-emerging signs of a fresh government crisis in the UK.

Gold treads water around $5,000

Gold is trading in an inconclusive fashion around the key $5,000 mark on Monday week. Support is coming from fresh signs of further buying from the PBoC, while expectations that the Fed could turn more dovish, alongside concerns over its independence, keep the demand for the precious metal running.

Crypto Today: Bitcoin steadies around $70,000, Ethereum and XRP remain under pressure

Bitcoin hovers around $70,000, up near 15% from last week's low of $60,000 despite low retail demand. Ethereum delicately holds $2,000 support as weak technicals weigh amid declining futures Open Interest. XRP seeks support above $1.40 after facing rejection at $1.54 during the previous week's sharp rebound.

Japanese PM Takaichi nabs unprecedented victory – US data eyed this week

I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.

Ripple exposed to volatility amid low retail interest, modest fund inflows

Ripple (XRP) is extending its intraday decline to around $1.40 at the time of writing on Monday amid growing pressure from the retail market and risk-off sentiment that continues to keep investors on the sidelines.