Market movers today
The key event today will be the ECB meeting , see preview . We do not expect any changes to the policy rates and find it unlikely that the ECB will outline a decision on extension/termination of the QE programme before June. That said, we are looking for the ECB to remove the easing bias in the forward guidance , meaning it will drop the paragraph about increasing the QE programme in size and/or duration if economic conditions turn less favourable.
US President Donald Trump’s protectionist measures will continue to be in focus, as he plans to sign orders for steel and aluminium tariffs today at 21:30 CET. For more on US trade policy and protectionism see our piece Research US: Symbolic protectionism with limited impact on growth and inflation but risks remain .
On the data front, we have German factory orders and US jobless claims.
In Scandi , it is time for industrial production data out of Norway and the Riksbank will hold its Open Forum.
Selected market news
Still a lot of focus on global trade and protectionism. Yesterday evening, a White House official said Trump plans to sign orders for the steel and aluminium tariffs today at 21:30 CET but NAFTA countries (and possibly other allies) will initially be exempt and Republican lawmakers issued a statement yesterday expressing concerns that broad tariffs could cost job and lift inflation, hurting the Republicans chances to win the mid-term elections in November. Instead, they think Trump should target China, see CNBC . With respect to China, we think the administration is waiting for the official ongoing investigation into Chinese stealing of US intellectual property before we see some action. China s foreign minister Wang Yi said yesterday that China would make a ‘justified and necessary response’ to measures hitting the country. As long as Trump’s measures are symbolic, we believe China will be cautious in its response, as the US is its most important export market. For more on this topic see our piece released yesterday Research US: Symbolic protectionism with limited impact on growth and inflation but risks remain .
Yesterday, the EU published its draft guidelines for post-Brexit relationship, which did not contain many surprises. The EU wants tariff-free and quota-free trade but reiterated that there can be no cherry picking by choosing which parts of the EU single market the UK wants to be a part of. The EU still thinks the only likely solution is a free trade agreement like Canada. Services will only be included with restrictions and there will be no special access for banks. The UK Chancellor of the Exchequer Philip Hammond said it is ‘hard’ to see an agreement not covering services, as the EU has a surplus in goods while the UK has a surplus in services. This is in line with our base case, as we expect a Canada-style FTA but with more services included.
The Fed’s blackout period begins next week and Bostic (voter, dovish) said yesterday that he has lifted his personal view on the number of Fed rate hikes from two to three, supporting our case that the Fed may just have become more confident in its three-hike signal.
