Market movers ahead
- In the euro area, the June ECB meeting is on Thursday. Focus will be on potential changes to the forward guidance in a less dovish direction. However, we do not expect the ECB to make any changes, to avoid any risk of an unwarranted tightening.
- In the UK, the single most important event will be the general election, also on Thursday. Though the gap between Labour and the Conservatives has narrowed, polls continue to point towards a win for Prime Minister Theresa May.
- We expect Chinese inflation to increase only moderately, while we expect PPI to come down fast, as commodity price increases have turned around.
- In Scandinavia, we are due to receive inflation data from Norway, where we estimate core inflation has declined. Hereby, inflation continues to undershoot Norges Bank expectations.
Global macro and market themes
- The global economy is still in fairly good shape, although starting to lose some tailwind.
- It would be a mistake to think that political risks are now off the global financial agenda. The risks have now (once again) moved back to the US.
- We argue that we are still in a bond-friendly environment. However, the global economy is losing steam and inflation has peaked.
- If the ECB changes course, it would be seen as premature and inflation expectations would dive further – and the result would be a ‘bearish flattening’ of the yield curve.
