Market movers today
Please note that today at 09:00 CET we publish the Nordic Outlook, which is our quarterly publication that presents our view on the economic out look for the Nordic countries. The publication does not contain new financial forecasts.
In the UK, focus is on Bank of England meeting at 13:00 CET. It is one of the small meetings with an Inflation Report and a press conference, so focus will be solely on the tone in the summary and minutes, as no one expects any policy changes. Our base case is that BoE maintains the hawkish twist to its neutral stance but given Q1 GDP growth was revised down (and not up as BoE expected) and nominal wage growth has declined, risk is tilted towards a more dovish tone. Market pricing seems fair at the moment as the first full hike is not priced in before late 2019.
Also in the UK, we getretail sales for May at 10.30 CET.
In the US, focus is on the Empire and Philly Fed manufacturing indices (both due at 14:30 CET), which may give us some indication about what to expect of ISM manufacturing in May. We also get actual industrial production data for May at 15:15 CET.
Selected market news
Fed hikes despite weaker data, provides details on quantitative tightening. As was generally expected, the Fed delivered its second 25bp rate hike so far this year (only Kashkari dissented). Thereby, the Fed defied the recent trend lower in inflation, as both CPI and PCE are below 2%, and the general softening in US economic data witnessed as of late. At the press conference, Fed Chair Yellen was relatively hawkish, referring to the decline in inflation as ‘noise’, while repeatedly referring to the low unemploymentrate. The ‘dots’ were unchanged in projecting one more hike this year, three hikes next year and a neutral Fed funds rate at 3%. Interestingly, however, the Fed issued an addendum to it s ‘Policy Normalization Principles and Plans’, providing details on how it expects to shrink its balance sheet in a process that should start later this year. For more information, 15 June 2017.
Market sends USD stronger, US fixed income holds on to gains. EUR/USD dipped back towards the 1.12 level, after rising earlier in the day on the weak US May inflation print (core CPI lower to 1.7% y/y vs. expectations of 1.9 % and 1.9% in April). US Treasuries sold off slight ly on Fed, but still trade richer over the day. The S&P500 index closed the day 0.1% lower, with losses driven by the energy sector.
