ECB and US CPI amongst market movers today – Danske Bank

According to Danske Bank analysts, today's main event is without doubt the long-awaited ECB meeting and they expect a more dovish package than other analysts.

Key Quotes

“We expect (1) a 20bp rate cut in the deposit rate and the extended forward guidance 'at present or lower...well past the horizon of net asset purchases ' to remain, (2) a 12M QE restart of EUR45-60bn per month, although we acknowledge there are downside risks given recent communications and (3) the introduction of a tiering system.”

“If ECB cuts the deposit rate today, focus will turn to Danmarks Nationalbank (DN) that is set to announce a rate change at 17:00 CEST . If we are right that the ECB cuts 20bp, we look for DN to cut the rate of interest on certificates of deposit 10bp to minus 0.75%.”

“Earlier in the day, we also get euro area industrial production data for July. Weak industrial activity has been a driver of the euro area slowdown, with the print falling 2.6% y/y in June following seven consecutive months of falling production. Judging from the country figures already released, markets should prepare for another disappointing reading showing the industrial slump extending into Q3.”

“In the US, August CPI core inflation is released. In the past couple of months, CPI core has surprised on the upside but we do not think this is the beginning of a trend given the low inflation expectations. We estimate a rise of 0.2% m/m in August (2.2% y/y). A narrowed field of 10 Democrat presidential candidates will also debate in Houston.”

“Key members of OPEC+ will meet on the side-lines of the World Energy Congress in Abu Dhabi. Discussions will likely centre on the recent slide in the oil price and output cap commitments.”