Main macro themes

  • Global economy still paints a mixed picture. While US data, including labour market and consumption data, have surprised markets on the upside in recent weeks, the cyclical position of Europe continues to be weak, especially in industry. Similarly, GDP growth in China slowed to just 6.2% y/y in Q2, the weakest since the early 1990s, though some data points to looser monetary conditions starting to help the economy.

  • Trade war. As widely expected, the Xi Jinping-Donald Trump meeting at the G20 meeting in Japan in early July ended with a ceasefire in the US-China trade war. The two sides agreed to restart trade negotiations, the US promised not to apply new tariffs but no deadline was set for the completion of the talks. Trump also lifted the export ban on Huawei, at least partially. The two sides have been talking over the phone but big obstacles remain to reach a deal that satisfies both sides.

  • European Game of Thrones concluded. Following intense negotiations, EU leaders struck an agreement on the succession race for the EU Commission and ECB presidency. The new head of the commission is Ursula von der Leyen - a seasoned centrist politician from Angela Merkel's CDU party. However, the most important appointment from a market perspective was Christine Lagarde as ECB President. We do not know much about Lagarde's thinking on monetary policy but we expect broad policy continuity as she has been open to unconventional monetary policy.

  • Dovish central banks. Due to the weakening momentum in the global economy and the sharp fall in market-based inflation expectations both the Fed and the ECB have turned more dovish. For the ECB, we expect a package deal in September consisting of a 20bp cut, QE restart of EUR45-60bn, tiering and extended forward guidance (see more in ECB Research - New ECB call - rate cut and restart of QE , 18 June). From the Fed, we expect a total of 75bp cuts in H2 19, with a first cut arriving in July.


Fixed income developments

  • The newfound dovishness by global central banks has supported fixed income markets at the beginning of the summer. The prospects of ECB easing sent German yields further into negative territory. Periphery debt has also witnessed a significant rally, fuelled by the Commission's decision not to launch an excessive deficit procedure against Italy at the current stage. However, the rally in fixed income markets came to a temporary halt following strong US non-farm payrolls and core inflation readings.


FX developments

  • Early-to-mid June continues to look like a turning point in the outlook for global macro and trends in financial markets. EUR/SEK and EUR/NOK are trading lower, driven by a broad USD weakness and hawkish communication from the Riksbank and Norges Bank. EUR has joined Scandies and is benefiting from a falling USD and dovish Fed, with EUR/USD now trading at 1.12. EUR/ GBP has shifted to 0.90 on the back of very weak UK data. USD/CNY has been stable at slightly below 6.9 since mid-May, as US-China relations have not been a key driver of CNY or cross-market moves in recent weeks.


Download The Full Strategy 

This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Forex Analysis

Editors’ Picks

EUR/USD surges above 1.13 after ECB's stimulus boost

EUR/USD is trading above 1.13, the highest since mid-March. The ECB added €600 billion in fresh stimulus, more than expected. The bank's move joins German stimulus and hopes for a recovery. 


GBP/USD avances toward 1.26 amid improving mood

GBP/USD trades closer to 1.26, buoyed by USD dollar weakness stemming from a better market mood. US jobless claims have marginally disappointed yet other US figures are more upbeat. Markets are shrugging off concerns about a no-trade-deal Brexit.


Will race relations rock markets? election campaign, coronavirus, crippled economy all in the mix

America is divided by demonstrations against racial discrimination that come on the backdrop of the coronavirus epidemic and attempts for a recovery. Will this or something else eventually affect markets? Valeria Bednarik, Joseph Trevisani, and Yohay Elam have a lively discussion about all these topics.

Read more

Gold recovers further from 1-month lows, moves back above $1715 level

Gold added to its intraday gains and refreshed daily tops, around the $1718 region during the early North American session.

Gold News

WTI: Recovery remains capped below $37 mark amid OPEC+ uncertainty

WTI (July futures on Nymex) is ranging in the familiar trading band near mid-36s so far this Thursday, having failed yet another upside attempts just shy of the 37 mark.

Oil News

Forex Majors