Danske Research Team
Danske Bank A/S
Market movers today
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Germany is due to release factory orders for October this morning. In line with strong surveys, German order growth has been strong in recent months and showed the highest growth rate in six years in September of 9.5% y/y.
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The ECB's Yves Mersch is due to speak in Frankfurt (11:30 CET ) on the theme ‘Challenges for Monet ary Policy in 2018', and will be the last ECB speaker before the silent period ahead of the December meeting.
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This afternoon, the US ADP employment report for November is due. It is not a good predictor of the monthly non-farm payrolls but nevertheless tends to get some attention as a warm-up for Friday 'spay rolls (see also US Labour Market Monitor: Expect strong November report). The October ADP employment increase was quite robust at +235k.
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The Bank of Canada is due to announce its rate decision at 16:00 CET. We and consensus expect rates to be unchanged at 1.0%. The Bank of Canada raised rates in July and September by 25bp at each meet ing.
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This afternoon, the DOE is due to release US crude oil inventories.
Selected market news
Asian stock markets slipped this morning, dragged by earlier losses on Wall Street as the technology sector stuttered yet again after a brief rebound, while the US dollar slumped on lower long-term US yields. The spread between five-year and 30-year US yields fell below 60bp, which is the lowest since November 2007. Industrial metals also plunged overnight on the prospect of slower Chinese demand, dollar gains and a rise in stockpiles. S&P 500 futures are slightly higher this morning, shrugging off reports that Republican efforts to avoid a government shutdown have stalled.
US President Donald Trump is expected to make an announcement today about moving the US embassy from Tel Aviv to Jerusalem, thereby implicitly recognising it as the capital of Israel and upending decades of US foreign policy. Such a move has been strongly criticised by Arab leaders and risks fuelling renewed violence and conflict in the Middle East .
In Norway, the November Regional Network Survey, which is Norges Bank's preferred gauge of economic activity, indicated improved growth prospects in all sectors besides construction, with capacity utilisation at the highest level since 2013.
This morning we published Danske Bank 2018 Fixed Income and FX Top Trades . In the fixed income sphere, we recommend positioning for further performance for carry strategies, small moves in out right yields, performance for Danish and Swedish fixed income, periphery performance, tighter USD liquidity in the CCS market and a further flat tening of the US yield curve . In it , we focus on five themes: (1). cyclical support for carry – but volatility is low, (2) policy normalisation, (3) a ‘new' Fed, (4) Scandi housing fragility and (5) currency vulnerability as the foundation of our trades.
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Editors’ Picks
EUR/USD consolidates weekly gains above 1.1150
EUR/USD moves up and down in a narrow channel slightly above 1.1150 on Friday. In the absence of high-tier macroeconomic data releases, comments from central bank officials and the risk mood could drive the pair's action heading into the weekend.
GBP/USD stabilizes near 1.3300, looks to post strong weekly gains
GBP/USD trades modestly higher on the day near 1.3300, supported by the upbeat UK Retail Sales data for August. The pair remains on track to end the week, which featured Fed and BoE policy decisions, with strong gains.
Gold extends rally to new record-high above $2,610
Gold (XAU/USD) preserves its bullish momentum and trades at a new all-time high above $2,610 on Friday. Heightened expectations that global central banks will follow the Fed in easing policy and slashing rates lift XAU/USD.
Week ahead – SNB to cut again, RBA to stand pat, PCE inflation also on tap
SNB is expected to ease for third time; might cut by 50bps. RBA to hold rates but could turn less hawkish as CPI falls. After inaugural Fed cut, attention turns to PCE inflation.
Bank of Japan set to keep rates on hold after July’s hike shocked markets
The Bank of Japan is expected to keep its short-term interest rate target between 0.15% and 0.25% on Friday, following the conclusion of its two-day monetary policy review. The decision is set to be announced during the early Asian session.
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