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ECB Under Added Easing Pressure‏

ByDanske Markets
Published 11/03/2013, 04:58 AM
Updated 05/14/2017, 06:45 AM

Market movers ahead

We believe the ECB should keep all policy rates unchanged at the meeting next week. However, we expect Mario Draghi to be very dovish and a signal rate cut could be coming. Given the very low outlook for inflation, we project a 25bp rate cut in December.

In the UK, we expect the Bank of England to keep the current policy unchanged.

In the US, we expect a subdued employment report, due partly to the short-term effects of the government shutdown and due partly to recent weakness in economic data. The first estimate of Q3 GDP growth is due to be released.

Fed speeches will be scrutinised for a soft tone after the FOMC statement this week was less dovish than expected and recent data have been on the soft side.

In Denmark, we will are due to get foreign exchange reserves and, in Sweden, the Riksbank minutes are due for release.

Global macro and market themes

Low inflation adds support to global growth and taken together these factors underpin credit markets. A sweet spot for risk for a long time also provides a risk of asset bubbles.

Focus has shifted from the Fed to the ECB following a less dovish FOMC statement than expected and expectations of a rate cut from the ECB have risen significantly. We believe EUR/USD has turned the corner and the move has further to go.

The ECB's lending survey for Q3 provided very good news, as banks expect to ease credit standards. This adds to the signs that growth in the euro area will surprise on the upside next year after tight credit has been a major headwind over the past year.

In Japan and China, PMI manufacturing rose, suggesting Q4 growth will be solid.

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