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Fall In Inflation Will Put Pressure On ECB To Cut Rates‏

Published 01/04/2014, 03:21 AM
Updated 05/14/2017, 06:45 AM

Market movers ahead

We expect the December inflation data for the euro area to show a fairly sharp fall to a new low of just 0.6%.

This would put pressure on the ECB to ease monetary policy despite the nascent recovery and, in our view, it will probably cave, although we do not expect this to happen at the coming week's rate-setting meeting.

Another relatively strong employment report is on the cards in the US.

The release schedule in China is not entirely clear yet but here too data showing a substantial fall in inflation would be a good bet.

On the other hand, inflation in Denmark and Norway will probably edge up in December for technical reasons.

Global macro and market themes

US data have generally been on the strong side, not least personal spending data, which point to strong spending growth in Q4.

The ISM fell slightly but remains high.

PMI data indicate that the crisis economies in Europe are set to join the recovery.

Chinese money market rates climbed strongly over Christmas - mostly a temporary phenomenon but also a sign that monetary policy has been tightened indirectly.

Swedish retail sales surprised on the upside but the PMI fell and the overall picture is still unclear.

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