HomeContributorsFundamental AnalysisCentral Banker Speak Continues To See Inflation As Transitory

Central Banker Speak Continues To See Inflation As Transitory

Notes/Observations

  • Central Bankers continue its further abatement of the global inflation threat.

Asia

  • RBNZ left Official Cash Rate (OCR) unchanged at 0.25% (as expected). Resumed its OCR rate path which was now projecting 150 basis points of tightening by 2Q 2024.
  • RBNZ Dep Gov Hawkesby: noted that the important message was that OCR rate path was NOT forward guidance.
  • China PBOC sets Yuan reference rate at 6.4099 compared to prior 6.4283 setting (strongest fix since mid-Jun 2018). Markets took sign that PBOC was comfortable with recent rally.
  • Japan LDP Party Official Yamamoto noted that BOJ was making a mistake by tapering as deflation was still a risk; BOJ must seek to weaken Yen currency further via asset purchases.

Europe

  • BOE’s Tenreyro: Expects global financial conditions to remain accommodative for a few years.
  • SNB President Jordan reiterated stance of not seeing any reason right now to change monetary policy as it still had very low inflation and a very strong CHF currency (Franc).

Americas

  • Fed’s Daly (non-voter, dove) reiterated Fed policy was in a very good place and needed to ride through economic data volatility. Believed rise in inflation was transitory.
  • Fed Vice Chair Clarida noted that recent increase in consumer prices was a very unpleasant surprise but reiterated Fed view that inflation was likely to be transitory.
  • White House Press Sec Psak noted that house price increases were raising concerns.
  • US House bill said to to address China moves ahead in a move to boost economc competitiveness and international cooperation. Would also address human rights concerns.
  • Senate Majority leader Schumer: tvote on China competition bill this week.

Energy

  • Weekly API Crude Oil Inventories: -0.4M v +0.6M prior.

Speakers/Fixed income/FX/Commodities/Erratum

Equities

  • Indices [Stoxx600 +0.18% at 445.98, FTSE +0.06% at 7,033.80, DAX +0.07% at 15,476.40, CAC-40 +0.26% at 6,406.88, IBEX-35 +0.17% at 9,224.00 , FTSE MIB +0.02% at 24,898.50, SMI +0.48% at 11,360.31, S&P 500 Futures +0.27%].
  • Market Focal Points/Key Themes: European indices open modestly higher, but later slid to trade generally mixed; consumer discretionary and health care sectors among those trending higher; while financials and materials underperformed; Vectura reaches deal to be acquired by funds managed by Carlyle; Engie completes sale of state in GTT; Delivery Hero sells Balkan operations; Spire Health Recives takeover offer from Ramsay; earnings expected in the upcoming US session include Bank of Montreal, Abercrombie & Fitch and Dicks Sporting Goods.

Equities

  • Consumer discretionary: Marks & Spencer [MKS.UK] +4% (earnings), Go-Ahead [GOG.UK] -4% (CEO retires).
  • Healthcare: Spire Healthcare [SPI.UK] +25% (offer), Vectura Group [VEC.UK] +32% (offer), Mediclinic [MDC.UK] +8% (earnings).
  • Industrials: Softcat [SCT.,UK] +6% (trading update).
  • Materials: SSE [SSE.UK] -1% (earnings).

Speakers

  • ECB’s Panetta (Italy) noted that ECB tapering talk was premature as current conditions did not justify such a move. Must look to see what the recovery looks like in 6-9 months from now and developments on inflation.
  • ECB’s Villeroy (France) stated in French Parliament that it must implement Basel III fairly and reasonably.
  • Sweden Central Bank (Riksbank) Financial Stability Report: Outlook was brighter but risks remain elevated.
  • Sweden Central Bank (Riksbank) Gov Ingves noted that stimulus measures were causing moral hazard and risk-taking.
  • Czech Central Bank (CNB) Gov Rusnok noted that Interest Rates could be hiked in either Jun or Aug meetings.
  • Japan Cabinet Office (Govt) May Economic Report cut its overall economic assessment and now saw further weakness in parts of the economy.
  • Tokyo, Japan Gov Koike stated that she would seek an extension of the State of Emergency for Tokyo and surrounding areas.
  • Japan said to set up panel to reinforce its economic security.
  • China State Media: Appreciation of the CNY currency (Yuan) might not be a good way to tackle the rise in commodity prices.
  • China Banking Regulator (CBIRC) said to have asked lenders to stop selling investment products linked to commodities futures to small retail buyers.

Currencies/ Fixed income

  • EUR/USD drifted lower after ECB’s Panetti stressed it was too early to consider any tapering of the pandemic Bond Buying Fund. Pair trading at 1.2240 area by mid-session and dealers noted that it remained stuck below the year-to-date highs by over a big figure.
  • NZD currency was former after RBNZ took on a hawkish tone with its OCR rate path. New Zealand now projecting that it might hike interest rates as early as September next year.

Economic data

  • (FI) Finland Apr Preliminary Retail Sales Volume Y/Y: 8.0 v 6.4% prior.
  • (DK) Denmark Apr Retail Sales M/M: -8.3% v +19.8% prior; Y/Y: 9.8% v 24.3% prior.
  • (FR) France May Business Confidence: 108 v 98e; Manufacturing Confidence: 107 v 105e; Production Outlook Indicator: 18 v 5e; Own-Company Production Outlook: 19 v 10e.
  • (FR) France May Consumer Confidence: 97 v 97e.
  • (SE) Sweden Apr Unemployment Rate: 9.4% v 10.0% prior; Unemployment Rate (seasonally adj): 9.1% v 9.0%e; Trend Unemployment Rate: 9.1% v 9.1% prior.
  • (PL) Poland Apr Unemployment Rate: 6.3% v 6.3%e.
  • 04:00 (PL) Poland Q1 Unemployment Rate: % v 3.3%e.
  • (CH) Swiss May Expectations Survey: 72.2 v 68.3 prior.

Fixed income issuance

  • (SE) Sweden sold SEK7.5B vs. SEK7.5B indicated in 3-month bills; Avg Yield: -0.1867% v -0.1980% prior; Bid-to-cover: 2.40x v 2.47x prior.
  • (IT) Italy Debt Agency (Tesoro) sold €3.5B vs. €3.0-3.5B indicated range in 0.00% Nov 2022 CTZ bonds; Avg Yield: -0.330% v -0.300% prior; bid-to-cover: 1.45x v 1.37x prior.
  • (IT) Italy Debt Agency (Tesoro) sold €1.25B vs. €0.75-1.25B indicated range in 0.4% May 2030 inflation-linked bonds (BTPei); Real Yield: -0.45% v -0.60% prior; bid-to-cover: 1.40x v 1.31x prior.

Looking ahead

  • (EU) Daily ECB Liquidity Stats.
  • 05:30 (DE) Germany to sell €2.5B in 0% May 2036 Bunds.
  • 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.
  • 05:30 (EU) ECB alloment in 3-month LTRO Tender.
  • 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).
  • 06:00 (CZ) Czech Republic to sell 2024, 2031 and 2032 bonds.
  • 06:45 (US) Daily Libor Fixing.
  • 07:00 (US) MBA Mortgage Applications w/e May 21st: No est v 1.2% prior.
  • 07:00 (MX) Mexico Q1 Final GDP Q/Q: 0.7%e v 0.4% prelim; Y/Y: -3.5%e v -3.8% prelim; GDP Nominal Y/Y: No est v -0.1% prior.
  • 07:00 (MX) Mexico Mar IGAE Economic Activity Index (Monthly GDP) M/M: +2.8%e v -0.3% prior; Y/Y: +0.1%e v -5.1% prior.
  • 07:00 (BR) Brazil May FGV Construction Costs M/M: 1.3%e v 1.0% prior.
  • 07:00 (UK) Weekly PM Question time in House.
  • 07:00 (RU) Russia OFZ Bond auction (if any).
  • 07:00 (TR) Turkey to sell EUR-denominated Bonds.
  • 08:00 (UK) Daily Baltic Dry Bulk Index.
  • 08:30 (BR) Brazil Apr Current Account Balance: +$6.1Be v -$4.0B prior; Foreign Direct Investment (FDI): $5.0Be v $6.9B prior.
  • 10:00 (US) Fed Vice Chair Quarleson insurance regulation.
  • 10:30 (US) Weekly DOE Oil Inventories.
  • 13:00 (US) Treasury to sell 2-Year FRN Reopening.
  • 13:00 (US) Treasury to sell 5-Year Notes.
  • 15:00 (AR) Argentina Mar Supermarket Sales Y/Y: No est v -5.8% prior; Shop Center Sales Y/Y: No est v -33.3% prior.
  • (CO) Colombia Apr Industrial Confidence: No est v 6.8 prior; Retail Confidence: No est v 38.7 prior.
  • 15:00 (US) Fed Vice Chair Quarles on economic outlook.
  • 21:00 (KR) Bank of Korea (BoK) Interest Rate Decision: Expected to leave 7-Day Repo Rate unchanged at 0.50%.
  • 21:30 (AU) Australia Q1 Private Capital Expenditure: 2.0%e v 3.0% prior.
  • 21:30 (CN) China Apr Industrial Profits Y/Y: No est v 92.3% prior.
  • 22:00 (KR) South Korea Apr Department Store Sales Y/Y: No est v 77.6% prior; Discount Store Sales Y/Y: No est v 2.1% prior.
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