Market sentiment remained volatile this week with further declines in US yields despite last week’s hawkish Fed surprise. Comments from Fed members confirmed that a debate on QE is on the cards, but also that policy rate changes are not around the corner. EUR/USD remained below 1.20 and we see scope for further USD upside after the summerBank of England kept its policy rate and bond-buying pace unchanged and pledged to maintain its accommodative policy stance until there is clear evidence that inflation will stay above target for a sustained period. Discussions on the ECB strategic review are also gathering pace in the Governing Council. While ECB policymakers still remain apart on a new inflation strategy, there is growing consensus to include the climate and owner-occupied housing in their decisions. As we argued in ECB Research Strategy Review:'leaving no stone unturned, 18 June. we expect a rather muted market reaction to the strategic review.

The euro area recovery picked up pace at the end of Q2 according to June PMIs, with business activity growing at the fastest rate in 15 years thanks to a strong rebound in the service sector. In the US PMI services fell, but volatile transport services might have played a role and we do not see it as a cause for concern. After a 'hot' summer we believe the global manufacturing cycle is set to peak during Q3 as some of the strong tailwinds behind the boom are about to fade (see also Research Global -Manufacturing cycle to peak in Q3, 21 June). We see scope for Europe’s manufacturing boom to extend into H2 21, with the turn of the cycle slightly lagging China and the US, but we do not think that the European manufacturing cycle can escape abating global momentum for long (see also Research Euro Area -Tide is slowly turning for European manufacturing, 22 June).

Swedish politics was plunged into turmoil after a majority in the Swedish Parliament supported a non-confidence vote against Prime Minister Löfven and his Social democrat-Green coalition government. The constitution gives the PM two options: 1) to resign and let the speaker investigate options for a new government-backed by parliament or 2) call for snap-elections (held within three months). Despite the uncertainty, we do not think it will have much of a market impact, see Research -Sweden in political crisis, 21 June.

Next week the key event for markets will be the June US jobs report, where the question will be whether “weak” jobs growth continues due to temporarily higher unemployment benefits. The June ISM manufacturing will also be monitored for any signs of accelerating/subsiding supply-side constraints and inflationary cost pressures. In Europe, focusis on the June flash HICP print which should show a further uptick in core inflation to 1.1% in our view, but with the headline holding steady at 2.0%. We look for a broadly unchanged Chinese manufacturing PMI in June as strong external demand and slowing domestic demand are pulling in opposite directions. We also keep an eye on oil prices, which lately touched USD/bbl 76 as a rebound in traveling is boosting demand. Higher oil prices have supported market inflation expectations and a continued rise could add to inflation risks. In Japan, the quarterly Tankan business survey is likely to paint a picture of a Japanese economy still heavily supported by the global manufacturing boom but only slowly improving services activity.

Download The Full Weekly Focus

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.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD eases below 1.1900, Eurozone GDP, US PCE Inflation eyed

EUR/USD holds the lower ground below 1.1900 amid broad-based US dollar rebound. The dollar benefits from covid woes, ignores Treasury yields pullback. US GDP backs Fed’s resistance to discuss tapering. A busy docket ahead, with focus on Eurozone GDP and US PCE inflation.

EUR/USD News

GBP/USD retreats toward 1.3950 as USD rebounds

GBP/USD pauses the advance and retreats towards 1.3850 ahead of the London open. The US dollar rebounds toward 92.00 after hitting a one-month low. Sterling remains underpinned on hopes that the BOE could be less dovish further due to a steady decline in the UK’s covid cases.

GBP/USD News

EUR/USD eases below 1.1900, Eurozone GDP, US PCE Inflation eyed

EUR/USD holds the lower ground below 1.1900 amid broad-based US dollar rebound. The dollar benefits from covid woes, ignores Treasury yields pullback. US GDP backs Fed’s resistance to discuss tapering. A busy docket ahead, with focus on Eurozone GDP and US PCE inflation.

EUR/USD News

Ripple bulldozes resistance, eyes $1.00

XRP price rebound has taken on an impulsive tone, lifting the cross-border remittances token near the convergence of the 200-day SMA with the longstanding inverse head-and-shoulders neckline around $0.775. Ripple falls short of triggering a double bottom pattern.

Read more

Why Tesla jumped over 4.50% on Elon Musk’s tweet?

Tesla needs to make a move, show its hand. Tesla stock saw a massive move higher on Thursday, rebounding firmly towards $700. Tesla shares rallied 4.69% to close the day at $677.35, slightly off the two-week highs reached at $683.47.

Read more

Majors

Cryptocurrencies

Signatures