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.
Next week´s key events USA Next week’s most important US data release is the Nov retail sales report. Nov retail sales (Thu) are expected to increase 0.5%, mainly driven by auto sales. The consensus is looking for a 0.2% rise …
The ECB kept rates unchanged and confirmed its forward guidance – key interest rates will remain at the current level or lower for an extended period. The ECB is ready to consider all available conditions, but is not ready to act at this point.
Will the ECB cut the deposit rate? Would a negative deposit rate change the growth outlook? Will a deposit rate cut weaken the EUR? Will EONIA turn negative? What is the lower bound for the deposit rate? Does a negative deposit rate at the ECB force banks to lend?
We expect very dovish signals from the ECB at this week’s monetary policy meeting, but no change in key rates. Risks are clearly skewed towards another rate cut and the door is likely to be left wide open to all non-conventional measures including a negative deposit rate, LTROs or possibly even QE. We could easily see the ECB announcing new liquidity measures to ease concerns around the turn of the year.
Next week’s most important US data releases are the Nov employment report and the Nov ISM manufacturing survey. We expect payrolls to come in at 170k (consensus at 183k) and ISM to come in at 55 in line with consensus.
UK GDP growth revised to 2.5% for 2014. BoE verbally on neutral after inflation report. Market rates have come up faster than we thought. GBP to perform better
The flash inflation print from the Euro zone will be closely watched next week. In addition, plenty of data out from Norway and Sweden with possibly large impact ahead of the upcoming Riksbank and Norges Bank meetings.
We have updated our Euro-area inflation profile. Inflation reached a year-low in October, but March 2014 could be lower. We expect inflation below 1% until mid-2014. The strong EUR matters. Core CPI was rather stable… until October. Implicit market expectations are now much too low. Deflation risks are small but rising. More ECB action not unlikely
• Norway: We expect Norges Bank to cut rates by two times 25bp next summer. There will however not be any such signals at the upcoming MPC meeting in December. Still, we believe the recent weakening of the NOK is …
The Bank of England changed their stance today with the publication of the November Inflation Report. The very first thing that Mark Carney said at the press conference really says it all: “Inflation is now as low as it …
Next week will be full of important GDP numbers from the Euro zone. In addition, inflation numbers will be out from both Norway and Sweden and will be key for the central banks.
Inflation previews and markets - SEK, DKK and EUR - October 2013
Markets may shrug off the downgrade of France by S&P for now as they have become accustomed to worse than small downgrades from AA+ to AA. According to S&P, “… French government macro-economic reforms will not substantially raise the country’s …
he ECB cut its refi rate by 25 bp today against our expectations that December was the most likely timing. Markets were taken by surprise. The ECB is probably done with easing in this cycle.
ECB cuts the refi rate by 25 bp to 0.25%. (depo rate unchanged; marginal lending rate down 25bp)
We now expect a 25 bp refi rate cut in December. We expect a clearly dovish tone at this week’s meeting. Liquidity will remain ample
All eyes on the ECB and the employment report from the US next week. In addition, the BoE rate decision, trade numbers from China and industrial production from Sweden. More on this in the Week Ahead!
Inflation in the Euro area moves further away from the ECB’s medium-term target of “close to but below 2%”. In October, the inflation rate dropped to 0.7%, according to Eurostat’s flash estimate. (We had flagged the risk of a below …
The main conclusion from the ECB Bank Lending Survey is that credit conditions stabilised during Q3 for companies and households. Thus, banks are no longer tightening credit conditions but have yet to start normalisation. Demand for loans remains weak but less so, and banks actually expect increased loan demand in the quarter ahead.
Euro zone excess liquidity last week fell below EUR 200bn and we see a couple of reasons why it could keep falling at current high pace ahead of the year-end.
Next week´s FOMC meeting will be important for the market´s tapering expectation and we expect a signal that tapering is off the table for this year. In addition, inflation numbers from the Euro zone will be closely watched, and any downside surprise would likely put additional pressure on the ECB to ease further.
Flash manufacturing PMI from China increased to 50.9 in October from 50.2 in September. The new orders index was the main contributor to the rise, which point to further improvements in coming months.
Next week´s key events US The employment report is set to be released on Tuesday. Markets will pay attention to the data to assess the momentum in the US economy prior to the shutdown. Euro zone PMIs and IFO …
All eyes will be on the fiscal negotiations next week and if there is a solution we may finally get the employment report from the US. In addition, GDP from China and the unemployment rate from the UK will be out. From the Nordics the new budget will be out from Norway on Monday and the unemployment rate from Sweden.
Here is an overview of our financial forecasts. Read the full report in the attachment or the headlines for a summary.
In spring the recovery was seen as the slowest in 100 years. Now, PMIs are the highest on record. In spring Governor Carney was the dove above doves. Now, he sees no need for more QE and is not afraid to hike rates at some point. The GBP has strengthening significantly as a consequence, but the most recent move higher in GBP/USD seems overdone. We maintain our longer-term GBP views: stronger vs the EUR and weaker vs the USD.
Inflation previews and markets - SEK, DKK and EUR - September 2013
While the FOMC minutes will be in focus markets could start paying even more attention to the government shutdown and its implications for successfully handling the debt ceiling. More on this and other hot topics in the week ahead!
Market talk The feeling of a recovery, spurred by the tapering debate and solid data, has rapidly been replaced by a bitter taste of the fragility of the global recovery… USD strategy The direction of US rates going forward is …
The ECB kept its key rates unchanged at today’s meeting and gave no new signals regarding future policy actions. The ECB intends to keep its policy rates at the current level or lower for an extended period. On the much …
ECB meeting with focus on LTROs. Italian Fight Night. Market complacency to the US shut down. VAT hike in Japan
Bunds ended yesterday slightly higher. US shut down is the name of today's game. Watch ISM and final Euro-area manufacturing PMIs today. Details of third arrow of Abenomics announced today.
The case for a new LTRO will be the focal point of Wednesday's ECB meeting. Thus, this month's ECB preview has been extended with a deeper look at the likelihood of another LTRO, the pros and cons and the potential market impact.
Political uncertainty is rising at a bad time when a few confidence indicators have started to show signs of improvement. New elections seem highly likely. Watch Wednesday's vote of confidence and Friday's vote to immediately strip Berlusconi from his Senatorial seat.
The US budget discussions will be in focus early on in the beginning of next week. Later on, ECB´s rate decision and the employment report will be closely watched. From Asia, Premier Abe´s tax hike decision will be a much anticipated event. More on this in the Week Ahead.
Bunds rose on Draghi comment. Dudley indicate tapering plan still on. Watch German Ifo, US consumer confidence today. Draghi: The ECB could use another LTRO to keep money market rates in check
It is Tapering day today. However, before focus turns completely to the Fed, Berlusconi will publish a video message and BoE publish minutes.
• We expect no new policy signals at this week’s SNB meeting, i.e. no changes in the 3M Libor target and no changes to the EUR/CHF floor in sight. • Despite some market participants awaiting a material weakening of the …
All eyes on the FOMC meeting next week. We expect the Fed to reduce the pace of its monthly bond purchases by USD 15bn, to USD 70bn. Focus will also be on Norges Bank interest rate meeting. Stay tuned for an exciting next week!
Good morning, Bunds were in demand yesterday, Italian bonds underperformed and it seems that Syria has become less of a driver for the markets and oil prices are some way off the highs of previous weeks. Analysts seem to have settled for a softer tapering message from the Fed next week. Today’s calendar includes US retail sales and consumer confidence from University of Michigan.
Bonds sold off yesterday as fears of an escalation of the Syrian conflict eased . Watch US mortgage applications and UK unemployment today. US housing market and the rising mortgage rates. Unchanged UK unemployment numbers.
We have updated out financial forecasts. There are both changes to rates and FX.
With all focus still on Fed tapering, markets are obviously still very sensitive to incoming economic data. In the light of that, retail sales and consumer confidence are on top of next week’s US agenda. In addition, industrial production numbers from the Euro zone, unemployment from Sweden and much more. Stay tuned for an exciting week!
The ECB kept its key policy rates unchanged at today’s meeting as widely expected. ECB President Draghi’s introductory statement by and large confirmed our view that the ECB has a clear easing bias despite recent better-than-expected key figures.
10Y US Treasuries yields dropped just a bit yesterday following an increased likelihood of military intervention in Syria. However, a very strong ISM manufacturing report put some pressure on Treasuries as well.
No new actions, but dovish words. Rising market rates are a key concern. We look for comments on the downside risks to inflation. New projections likely to show minor changes. Market view
Here is our new financial forecasts. We have revised our 3-months yield forecast in the US and the Euro-zone higher.
Our take on the Monetary Policy Committee meeting on 1 August: Decision on forward guidance to be taken … but only to be revealed together with the inflation report on 7 August We expect no change in policy rates and …
Our take on the ECB meeting on 1 August: No new measures Rate cut risk remains Forward guidance as the modern form of “open mouth policy” After a hectic ECB meeting in July (commented by Anders Svendsen here: Soft forward …
Here is an overview of our financial forecasts. Read the full report in the attachment or the bullets for a summary.
In the Euro zone the 3 year LTRO repayments have continued in steady pace and excess liquidity is expected to reach EUR 100-200bn in the end of this year. These are levels where EONIA historically has moved towards the refi rate, and in this publication we look deeper into the topic that could become an important theme during the autumn.
Strong US labour market report lifted rates, though the ECB has had some success in decoupling the long end. Good news from Greece and Portugal to outweigh potentially negative data release today. Focus on the Fed in the week ahead. Interesting Spiegel article about the internal split in the ECB.
Forward guidance is the new black among central bankers. Political crisis in Portugal. Today, there is only one thing on the agenda: US payrolls
Forward guidance seems to be the new black among central bankers. The soft guidance from the ECB today has a significant degree of discretion to it, which means that Draghi can use it to guide market expectations and the risk sentiment. However, it is not actually a promise and should probably not be seen as more than an indication of the ECBs clear easing bias.
The ECB left key interest rates unchanged as widely expected. Draghi struck a very dovish tone saying that rates will remain at present or lower levels for an extended period. Moreover, the governing council had an extensive discussion about cutting the interest rates; does not see the 0.50% as the lower bound; and has an open mind on all interest rates including the deposit rate. That is probably as dovish as the ECB could possibly be without actual actions.
No changes to the policy stance at the first MPC meeting under Mr Carney today, but a clear indication that forward guidance is the first priority, and, if rates remain at the current level, that guidance will be in a dovish direction.
Risks have increased with the political crisis in Portugal. A fall of the government followed by new elections would be bad news for Portugal, and, depending on the outcome, for the Euro area as a whole. The Euro crisis is far from over.
Today’s menu is ECB, BoE and Spanish auction. Next step in Portugal is keeping the government together. Strong numbers yesterday. Riksbank stays on hold as expected. ECB preview: Monetary exit remains very distant. BoE preview: The King has left the building
Sir Mervyn King was replaced as Bank of England (BoE) Governor by Mark Carney today. Thursday's MPC meeting will be the first chaired by the new Governor and therefore potentially interesting even if recent economic developments do not give much reason to expect changes in the monetary policy stance.
We expect rates to be kept unchanged, which is in line with the general perception. This week’s meeting will be about the implications of the sell-off in fixed-income markets. Draghi is likely to repeat that an ECB exit is very distant; that rates will rise at some point; while excessive rate rises in the periphery could be dealt with by activating the OMT.
PBoC softens its stance. US data beats expectations. ECB probably not very concerned with rising interest rates
Here is a overview of our financial forecasts. We have made minor changes to the US rates and the commodities forecasts, and we summarize last week's FX forecast changes.
•Will higher rates prompt an ECB reaction? •Recovery is finally on the way in the Euro area •Norges Bank: No rate change, but might cut in September
We have made minor adjustments to our longer-term financial forecasts for the UK. Below we summarise our scenario and the key reasoning behind the numbers.
We take a deeper look at deflation risks in the Euro area will be a major theme during the second half of this year. Deflation risks seems small but rising. More evidence of rising deflation risks we believe we will see a much more aggressive ECB.
There was not a lot of news in ECB’s monetary policy meeting today. The ECB is ready to act again, if key figures disappoint, but still expect a gradual recovery during the second half of the year. There was no sense of urgency about more action at today's press meeting.
After a pretty hectic ECB meeting a month ago, we expect a somewhat more calm sentiment around this week’s event, but rates may still fall. We expect no change in rates and nothing new on the ABS programme this time around. Draghi is likely to strike a dovish tone to support sentiment and confidence, probably stressing recent key figure improvements and keeping the option of negative rates on the table.
We forecast EURCHF at 1.25 by year-end and at mid-2014, and 1.30 at end-2014 Recent CHF weakness reflects the general risk-on environment while also speculations about additional easing measures being imposed by the SNB It remains to be seen if …
With Fed appearing somewhat more inclined towards QE-tapering than previously signaled, we bring down our 3 month EURUSD forecast to 1.32. We also adjust our Brent Q2 forecast down to USD 105/bbl.
We now expect the ECB to keep rates unchanged at the current level until the beginning of 2015. Risks are clearly skewed towards another rate cut in the near term. Speculation in a deposit rate cut could take market rates to new lows in the near term and we have revised the market rates forecasts lower on all horizons. Lower EUR rates have implications for the EUR/USD forecast in the longer run, and we have decided to lower the end-2014.
The ECB cut its refi rate by 25 bp to 0.5% as most expected. With the interest rate cuts the ECB do seem to be delivering something when not being able to deliver what it actually wants to, ie support to SMEs. Still, Draghi also seems more open than previously to further easing steps even after today’s decision to cut interest rates, which will support risk appetite in financial markets.
The Euro-area flash estimate for inflation in April fell to 1.2%! This follows a reading of 1.7% in March and we have looked a bit deeper into a few questions: Temporary or permanent? Good news or bad? ECB reaction or not?
Markets have once again started pricing in some risk of a rate cut and a majority of analysts now expect a refi rate cut from the ECB already at the meeting this week. We stick to our call and find it most likely that the ECB will keep rates on hold and instead come up with new measures to support bank lending to Small and Medium-sized Enterprises (SMEs).
We believe the ECB sees additional interest rate cuts beyond the current level as more or less ineffective. That is the reason, in our view, that interest rates were not cut already in December. However, key figures have surprised to the downside and we believe the ECB will have to act if the bank believes the economic outlook has weakened further or if it is unable to come up with an SME “support package” even if it believes the effect will be limited. An unchanged PMI reading today does not make a big difference in our opinion.
We have made a number of adjustments to our financial forecasts including US rates, EUR/USD, GBP, CHF, JPY and base metals. The big story is unchanged!
Draghi turned more dovish at today’s ECB press conference. Another rate cut has become more likely, but still depend on incoming data in the near term.
We expect no changes in key policy rates and no new non-standard measures from the ECB at Thursday’s meeting. Lots of questions about Cyprus, but Draghi will probably not give any answers. Market reaction could be slightly negative again.
Here are the usual financial forecast slides with our new financial forecasts published this this morning in Economic Outlook. We have changed our forecast for the Fed, the BoE, the SNB, Riksbanken, Euro rates, USD rates, EUR/USD, JPY, GBP, SEK, NOK, oil and the base metals.
A EUR 10bn bailout for Cyprus was agreed on Saturday. Today, the Cypriot parliament will have to pass the most controversial part of the bailout. In our view, the bailout does not change the overall picture for the Euro area here and now even if the final bailout terms include a haircut on deposits that was supposed to be insured. However, the current deal clearly increases the longer-term risks for the Euro area.
The ECB decided to keep interest rates unchanged at today’s meeting. Draghi’s statement was more or less unchanged in its wording compared with the statement a month ago. Draghi remains dovish but more weakness is needed to make the ECB cut rates.
We expect no changes in key policy rates and no new non-standard measures from the ECB at Thursday’s meeting. The new staff projections for growth and inflation will be roughly unchanged. There will be no help for Italy from the ECB.
The one thing that seems clear after the Italian election is that nothing is clear at all and uncertainty will linger on. As Bersani put it: Italy is in "a very delicate situation."
The UK was downgraded one notch by Moody’s from Aaa to Aa1 on Friday. Moody’s says the rating outlook is now stable. It is not a major surprise that the UK has been downgraded. Many expected the downgrade already last year and there were numerous rumours during last week. S&P and Fitch both have the UK on negative outlook and may follow soon.
The other bigger one-time repayment of ECB 3-year loans will take place next week, when the second 3-year LTRO will have its first repayment date. The repayment interest is likely to come below the EUR 137bn seen in the first operation. That said, as we have seen a notable correction lower in short interest rates since the first repayments, risks are tilted towards higher rates and a steeper money market curve ahead of Friday’s data.
Italian general elections, due 24-25 February, are nearing and hence we take the opportunity to sum up our views and add a scenario, where Berlusconi unexpectedly wins the lower house. The election is most likely to produce a favorable outcome …
This is a regular monthly update of our financial forecasts. See the summary below or the full report via the link. Markets have settled a bit since our 29 Jan update (Markets getting too far ahead of economies). Still, we …
The ECB left key policy rates unchanged as widely expected. Draghi struck an optimistic tone, but was maybe slightly more concerned about the LTRO repayments and EUR strength than most had expected.
I expect no change in rates, no new non-standard measures and no change in bias. Is the ECB concerned about large-scale LTRO repayments draining liquidity? Is the ECB concerned about the rise in short rates and strengthening of the EUR?
De finansielle markeder vil være præget af risikovillighed i den nærmeste fremtid. Men som følge af manglen på fundamentale forbedringer venter vi en korrektion i løbet af foråret.
Expectations of another ECB rate cut were taken out of the markets after the January ECB meeting when Draghi was perceived to be too upbeat on growth prospects to consider cutting interest rates again. Ironically, Draghi’s tone and the surprisingly large LTRO repayments may force the ECB to cut interest rates again!
Risk-on is likely to dominate in the very near-term but given the lack of fundamental improvements we expect to see a correction sometime during the spring.
David Cameron’s long awaited speech on the future of Britain in the EU was delivered today. The key message is that his government will campaign for a mandate to change the EU and Britain’s role in it in the 2015 elections and in exchange offer an in-or-out vote to the British people – probably in 2017, if everything goes according to plan.
In our view, the key questions are: 1.Who will repay and how much? 2.Will short rates move higher if a lot of LTRO loans are repaid? 3.Is it a good or a bad sign if a lot of LTRO loans are repaid? 4.Is there a case for an ECB response? 5.What will happen to German bonds?
The German statistics office said that the Q4 estimate was a 0.5% q/q contraction, making it the worst quarter since the disastrous 2009Q1.
We have only made minor changes to the financial forecasts this time: We have lifted our mid-year target for the EUR/USD to 1.25, made minor changes to the GBP forecast, lowered our 3M EUR/SEK forecast to 8.60 and we have postponed the first hike from Norges Bank to March 2014 and only expect two hikes in 2014.
The ECB decided to keep interest rates on hold today as most had expected. At the press conference, ECB President Draghi more or less repeated the statement from December, which in our view means that the door is wide open for more ECB easing, but it will require more economic weakness.
The next easing step from the ECB could be the introduction of a temporary price level target path.
Berlusconi announced on Monday that his party, the People of Freedom (PdL), had formed an electoral pact with Lega Nord. This move increases the risk of a hung government and, in turn, a weak government, exactly what Italy does not need.
I do not expect any action from the ECB at this Thursday’s meeting. There is still a risk that the refi rate will be cut, though, and, if not, the door will be kept wide open for future rate cuts.