Oil prices continue to fall

Danske Research Team Danske Bank A/S

Market movers today

We have another quiet day today in terms of data releases. The single most important event is President-elect Donald Trump's press conference in New York City, which is expected to be held at 17:00 CET (we have not been able to confirm this). Hopefully, we will get more details on what to expect from the new Trump administration, although we do not know exactly what he is going to talk about. We will listen carefully for any comments on fiscal policy, trade policy, the Homeland Investment Act 2 and border adjustment taxes.
The main event in the European markets today, given very little economic data, will be the Italian constitutional court's ruling on the labour market reforms implemented by the old PM Matteo Renzi – see also the Fixed Income section on the next page.
In terms of data releases, focus is on the UK, as industrial production and construction output data for November as well as the NIESR GDP estimate for Q4 are due out. UK PMIs have risen in recent months in line with global PMIs, suggesting that the UK economy continues to be resilient to Brexit uncertainties. It is still our view that growth will slow this year due to Brexit uncertainties and higher inflation.

Selected market news

In the US yesterday, the NFIB small business optimism index rose 7.4 index points (the most since 1980) to 105.8, which is the highest level in 12 years. Since October before the election, the optimism index has risen close to 11 index points, so the increase is quite significant. Looking at the subcomponents, small businesses expect higher sales, more investments and higher employment. The reason behind the large increase is the Trump victory, as many small businesses expect Trump to loosen regulation and lower taxes significantly – it did not take long before Trump noted the surge on Twitter. The higher optimism among small businesses comes on the back of a jump in consumer confidence, which is at the highest level since August 2001, so both consumers and companies are excited by the upcoming Trump presidency. We still do not know much about how President-elect Donald Trump will act as President, but we see a risk that corporates and consumers may be disappointed, as his actual policy is likely to be more modest than suggested during the election campaign.

Intel chiefs have presented President-elect Trump with claims of Russian efforts to compromise him. According to sources, the Russians should be in possession of compromising personal and financial information about Trump, see also the CNN story. Donald Trump has called it ‘fake news' on Twitter.

Oil prices continue to fall yesterday and went below USD54/bl. Along with the lower-thanexpected Norwegian inflation figures, the decline in the oil price pushed EUR/NOK up to 9.08 – the highest level since the beginning of the year. In our view, Norges Bank will not be too concerned with the decline in inflation and thus it does not change our view that EUR/NOK should head back below the 9.00 level in the short term as NOK remains supported by valuation, economic growth and real rates.

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 hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.