Chinese HSBC flash PMI for the manufacturing sector dropped further to 48.1 in March from 48.5 in February.
Anders Svendsen is a Chief Analyst with Nordea, covering the Euro area economy. He has over 10 years of experience in global financial markets, mainly covering economies and currencies in the burgeoning emerging markets arena.
Anders is currently very focussed on the debt crisis in the Euro area and its implications from an economic point of view as well as analysing the consequences for FX and fixed income markets.
Over the course of the last year we have seen an increased interest in the liquidity management of the ECB. Consequently, we have put together a primer trying to explain some of the key concepts. The material could be of interest for anyone with a euro exposure keen to understand how the ECB conducts liquidity management. Hopefully, we can also share some new insights with importance for investors trading FX forwards, cross-currency or tenor basis and the euro money market.
The FOMC meeting is the highlight of next week, in an otherwise light calendar. Will the Fed stay the course? Find our expectations here.
•SEK: Rate cut effect lingers, value in BEI •DKK: Temporary setback •EUR: Higher core inflation
The ECB kept rates on hold as 40 out of 56 polled by Bloomberg – including us – expected. The ECB also decided to continue sterilising its sovereign bond holdings under the SMP. Rates rising and the EUR/USD reach 2014-highs.
Risks related to an escalating conflict in Ukraine took sovereign bond yields clearly lower. Numbers out yesterday surprised on the upside - ISM, French PMI. Draghi quoted for concerns about inflation expectations becoming dis-anchored. Austrian auction today, no major data releases.
We maintain our view of no rate changes at this week’s ECB meeting. The Euro area is recovering and we believe the ECB will see the inflation outlook as broadly unchanged.
We have an action-packed week ahead of us, with non-farm-payrolls, ISM and central bank meetings in Europe and UK. Find our expectations here.
The flash estimate of Euro-area HICP inflation in February came out at 0.8% y/y, which is unchanged from the revised January number and a small upside surprise to our expectations and consensus expectations of 0.7%.
We expect the Euro-area flash HICP inflation estimate (Friday 11:00 CET) to be 0.7% y/y. We see risks skewed to the downside to tomorrow’s number. However, with Germany out already, the risk of a number low enough to prompt ECB easing next week in itself is probably fairly low, especially because the German numbers were held down by falling energy prices.
Ifo came in better than expected, supporting the view of an improving growth outlook. If the ECB were to act in March it would not be because of growth, but a deteriorating inflation outlook. However, inflation was revised higher for January. Bund yields a bit higher. Friday's flash inflation for February will be next crucial information.
We have updated our financial forecasts
The German IFO index on Monday and the Euro area flash CPI on Friday are the main events next week. Find our expectations here. Enjoy!
2014 has started with a correction on global financial markets. We see the events of 2014 so far as more than merely noise, but at the same time, well short of the start of a major correction.
Yesterday was fairly quiet in the markets. Both equity and bonds markets seem to have stabilised a bit. No major data releases are due for some time and hence market direction could be a bit sideways in the very near term. US retail sales are due today and jobless claims too, but will hardly be big game changers. Focus on Riksbanken and Norges Bank today.
The long-awaited inflation report from Bank of England (BoE), which was followed by a press conference with Governor Carney, had no new thresholds for the unemployment rate. Threshold-based forward guidance thus seems to be scrapped just six months after its introduction.