Market movers today
Today, the Riksbank will present a proposal on target variables and possible intervals (09:30 CET). Overall, it seems likely that the Riskbank will change to target the CPIF but it seems more questionable whether it will int roduce a tolerance interval. Our assessment is that neither a change of target variable nor a new tolerance range will change the monetary policy pursued.
In Norway, GDP figures for Q1 are due out today. We estimate that mainland GDP climbed 0.5% q/q, which is above Norges Bank’s project ion in the March monetary policy report (0.43%).
We estimate UK CPI inflation rose to 2.8% y/y in April from 2.3% y/y, which is higher than consensus. The fact that many UK gas and electricity companies have lifted their prices from April and the timing of Easter (April 2017, March 2016) make it more difficult to estimate inflation in April.
In Europe, relief over the French presidential election pro-EU outcome is likely to drive ZEW expectat ions upward further (supported by rising Sent ix expectat ions in May).
In the US, industrial production figures for April are due.
Selected market news
Further controversy was added to Donald T rump’s short tenure at the White House with the President reportedly revealing intelligence secrets at the meeting with Russian Foreign Minister Sergey Lavrov last week. A White House official has dismissed the story as untrue, but the episode has added to the general uneasy atmosphere around the presidency among both Democrats and Republicans.
Yesterday the ECB released the first data regarding the utilisation of their altered securities lending facility. Since the ECB started accepting ‘cash for bonds’ (implemented mid- December 2016) the market has been looking for clues to the effectiveness and extent of the facility. The figures disclosed a ‘cash for collat eral’ utilisation of EUR18.1bn, which is well below the limit of EUR50bn. With this release the ECB has shown that the current securities lending facility is fully operational and has plenty spare capacity, reducing the urgency of the ECB to alter the facility a further.
Saudi Arabia and Russia’s willingness to extend the supply-cut deal into March 2018 helped a further rebound in the oil price with Brent Crude trading briefly above USD52.5 per barrel but settling near the USD52 per barrel mark. However, large producers Iran and Iraq have been talking about expanding their production capacity in coming years, which does not bode well for a long-term extension of the supply cuts and could add downward pressure on the oil price.
