12 March we released a new Economic Outlook with updated real-economic forecasts for 2014 and 2015. We also updated our longer-term financial forecasts for central banks, rates, FX and commodities. We have made no changes since then, but this slide set is intended to give a quick overview of our main financial forecasts.
Johnny Bo Jakobsen
Johnny Bo Jakobsen is Nordea Markets' Chief Analyst on the US. He is responsible for Nordea's view on the US economic outlook and Fed policy.
Johnny has been with Nordea for 15 years and during that time he has also covered Japan, the UK and Denmark. Prior to joining Nordea, Johnny worked at the Danish Ministry of Economic Affairs and he holds an M.Sc. (econ) from the University of Aarhus.
We are sceptical that there is as much slack in the labour market as the Fed indicates. As a matter of fact, we believe the unemployment rate is most likely overstating slack. Signs of increasing labour market pressures in H2 2014 are the reason we expect that USD rates will start trending up again and that the USD will strengthen.
The big surprise from the Fed today was that the projections of the FOMC participants point to a slightly more aggressive path for interest rate increases in 2015 and 2016.
Flight-to-quality flows have pushed bond yields lower again, and risks remain tilted towards lower yields, as tensions between Russia and the EU/US over Ukraine / Crimea could easily escalate. On the central bank front, the ECB is struggling with a strong currency. More on this in this months edition of European FI Strategy.
The FOMC meeting is the highlight of next week, in an otherwise light calendar. Will the Fed stay the course? Find our expectations here.
Today’s stronger-than-expected payrolls data are a very positive sign because the details even suggest that the unusually cold weather was an important drag on February’s jobs growth. As a result, the report supports our view that US economic activity indicators more generally will snap back once the weather normalises.
Scandinavian key figures are the main events next week. Price data from both Sweden and Norway could have a large impact on their respective central banks. Find our expectations here.
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.
We have updated our financial forecasts
Concerns that the US recovery in losing steam are misplaced, in our view. However, with the weather having been just as severe in February, we might not see significantly stronger US data for still some weeks to come. Will markets look through more (weather-induced) data weakness?
Central Bank meeting minutes from both UK and US are the main events next week. Moreover we will have price data from both US, UK and Sweden as well. Find our expectations for the upcoming week here.
As expected, Fed chairman Janet Yellen gave no new policy signals today in her first public remarks since becoming Fed chairman on 3 February. Thus she indicated that the Fed will likely push on with the taper.
Today’s jobs report was a mixed bag, but weaker-than-expected payrolls will likely add to the recent market concern that the US recovery might be coming off the rails. The details suggest that the weather was not the reason for the weak payrolls gain.
Next week we get GDP figures from the Euro zone where we hope to see a 0.3% q/q increase. The inflation report from UK will attract a lot of attention as the pound could use a positive report. From the US it is a quiet week with highlight being Fed Chairman Janet Yellen testifies to the House.
Yet again, a fresh battle over the federal debt ceiling is looming and the issue will likely grab the market’s attention, at least for a while.
Colder-than-normal weather in the US probably helped slow manufacturing activity last month, but there might be more to the weakness than just bad weather. Stay tuned!