Weekly Focus: Riksbank may be next to join 'exit camp'

Danske Research Team Danske Bank A/S

Market Movers ahead

We look for the FOMC to announce 'quantitative tightening' and signal one more rate hike this year when it meets on Wednesday.
We expect EUR manufacturing PMI to show a slight drop from the current strong level as the stronger euro is likely to weigh a bit on euro exports. We also look for a small decline in the German ZEW index.
Chinese house price inflation for August is likely to show a further moderation as tightening measures are starting to dampen home sales and prices.
Bank of Japan: we expect it to keep its policy stance unchanged.
In Scandinavia, the Riksbank's minutes should give more insight into how close the bank is to joining the 'exit' camp. We don't expect any rate change or change to the rate path from Norges Bank at its meeting on Thursday.

Global macro and market themes

Central bankers look increasingly divided into those in the 'exit' camp (Fed, BoE, ECB), those in the 'no exit camp' (BoJ, SNB), and those in between (Riksbank, Norges Bank).
While the Fed looks determined to hike in December, it is unlikely to drive a major sell-off in EUR/USD.

Download The Full Economic Indicators

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: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

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: Volatility persists in commodity space

After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.

Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms

US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.

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.