Danske Research Team
Danske Bank A/S
Market movers today
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Today's main event is the ECB meeting . Following the latest ECB meet ing in early March, market part icipants have speculat ed about t he sequencing of t he ECB's exit st rat egy and some weeks ago, the market priced in a 10bp deposit rate hike from the ECB at the end of this year. Since then, the communicat ion from prominent ECB members has signalled a more dovish st ance and in t he most recent speech from Mario Draghi he concluded ‘a reassessment of t he current monetary policy st ance is not warrant ed at this st age' . We expect the ECB to send the same dovish message at the coming meet ing, while we believe it will stick broadly to its current int roductory statement without removing some of the soft wording.
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Ahead of Draghi 's press conference at 14.30 CET, the German inflation figures are released.
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In the US, core capital goods orders are released. Although the oil price has not increased in 2017, manufacturing confidence is very high, indicat ing tail winds to core capital goods orders.
Selected market news
Asian equity markets are more or less unchanged this morning following the US administ rat ion announcement on its tax plans and the Bank of Japan meet ing this morning. Regarding the US tax plans, there was no major news, as the Trump administ rat ion repeated that it wants to both cut and simplify taxes for individuals (7 to 3 tax brackets) and corporates (15% corporate tax, one-off t ax on dollars held overseas " homeland investment act 2", territorial t ax (did not use t he words border adjustment tax) financed by removing most tax deduct ions and higher GDP growth (" 3% or higher"). We still believe Trumponomics will come later and be smaller than previously pledged and t hat a deal is unlikely to be reached unt il aft er Congress's August recess. US equity markets finished flat while the USD weakened slight ly overnight against the EUR. Focus in US politics is now on avoiding a U.S. government shutdown, which requires a spending bill to be passed by both houses of the US Congress and signed by President Donald Trump by tomorrow at midnight .
This morning, the Bank of Japan (BoJ) kept its monetary policy measures unchanged as widely expected. No noteworthy react ion in USD/JPY afterwards suggest ing that unchanged policy from the BoJ was widely expected. We still expect that the BoJ is likely to keep its policy unchanged for the rest of Koruda's current term as governor, which ends in April 2018.
On trade related issues, the Trump administ ration agreed not to terminate NAFTA at this time and the leaders from Mexico, Canada and the US agreed to proceed swift ly, according to their required internal procedures, to enable the renegot iat ion of the NAFTA deal to the benefit of all three count ries according to a Bloomberg story ({NSN OP1TGZ6S972H }). The Mexican Peso, which has already st rengthened the most (9.25%) among emerging market currencies against the USD this year, gained another 1.4% this morning. Also the CAD st rengthened by 0.55%.
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