HomeContributorsFundamental AnalysisNorway Clarifies Timing For 1st Potential Rate Hike, Italy Appoints A Euro-Skeptic...

Norway Clarifies Timing For 1st Potential Rate Hike, Italy Appoints A Euro-Skeptic To A Key Govt Committee

Notes/Observations

  • No surprises in central bank rate decision in session (SNB, Norges and Taiwan all keeping policy steady)
  • Norway fines tunes its 1st potential rate hike to Sept (from after summer)
  • Italy appoints a Euro-skeptic to head its Parlaimentary Finance Committee, Italian yield s higher, Euro currency at 3-week lows

Asia:

  • BOJ Funo reiterated need to patiently promote strong monetary easing under current framework
  • New Zealand Q1 GDP in line (Q/Q: 0.5% v 0.5%e; Y/Y: 2.7% v 2.7%e)

Europe:

  • ECB reportedly sees more reinvestments from QE in 2019 with at least €160B QE debt maturing next year expected to be reinvested
  • UK govt won a vote in parliament, defeating Brexit ‘meaningful vote’ amendment (As expected after compromise made earlier)
  • S&P affirmed EU sovereign rating at AA; outlook Stable
  • EU draft proposal on migrants: to strengthen external border protection; members agree to support migrant reception and resettlement outside of the EU

Americas:

  • Fed Chair Powell: gradual rate hike case was broadly supported on FOMC; despite uncertainty around full employment level, case for gradual hikes is strong
  • President Trump said to be considering plans to curb Chinese investment in more than 1,000 US companies
  • Brazil Central Bank (BCB) left its Selic Target Rate unchanged at 6.50% (as expected) for its 2nd straight pause in the current easing cycle

Energy:

  • Saudi Arabia said to be seeking a 600-800K bpd production increase from OPEC+ producers

Economic Data:

  • (NL) Netherlands Jun Consumer Confidence: 23 v 23 prior
  • (NL) Netherlands May Unemployment Rate: 3.9% v 3.9%e
  • (NL) Netherlands Apr Consumer Spending Y/Y: 3.0% v 3.2% prior
  • (CH) Swiss May Trade Balance (CHF): 2.8B v 2.3B prior, Real Exports M/M: 0.0% v 0.4% prior, Real Imports M/M: +3.1% v -0.4% prior
  • (DK) Denmark Jun Consumer Confidence: 10.6 v 8.5e
  • (NL) Netherlands May House Price Index M/M: 0.9% v 0.4% prior; Y/Y: 8.9% v 8.8% prior
  • (HU) Hungary Q1 Current Account: €1.0B v €0.9Be
  • (FR) France Jun Business Confidence: 106 v 106e; Manufacturing Confidence: 110 v 108e, Own-Company Production Outlook: 14 v 16e, Production Outlook Indicator: # v 15 prior – (CH) Swiss May M3 Money Supply Y/Y: 2.9% v 3.3% prior
  • (HU) Hungary Apr Average Gross Wages Y/Y: 12.6% v 10.5%e
  • (TR) Turkey Jun Consumer Confidence: 70.3 v 69.9 prior
  • (MY) Malaysia Mid-Jun Foreign Reserves: $107.9B v $108.5B prior
  • (CH) Swiss National Bank (SNB) left its Sight Deposit Interest Rate unchanged at -0.75% (as expected) and maintained its 3-month Libor Range between -0.25% to -1.25%
  • (TW) Taiwan May Export Orders Y/Y: 11.7% v 8.6%e
  • (NO) Norway Central Bank (Norges) left its Deposit Rates unchanged at 0.50% (as expected)
  • (PL) Poland May Retail Sales M/M: 2.7% v 1.9%e; Y/Y: 7.6% v 7.4%e, Real Retail Sales Y/Y: 6.1% v 6.0%e
  • (ZA) South Africa Q1 Current Account (ZAR): -229B v -188Be; Current Account to GDP Ratio: -4.8% v -3.9%
  • (ES) Spain Apr Trade Balance: -€3.1B v -€0.8B prior
  • (UK) May Public Finances (PSNCR): +ÂŁ4.5B v -ÂŁ9.7B prior; Public Sector Net Borrowing: ÂŁ3.4B v ÂŁ4.9Be; Central Govt NCR: +ÂŁ6.9B v -ÂŁ6.1B prior; PSNB (ex-banking): ÂŁ5.0B v ÂŁ6.3Be
  • (HK) Hong Kong May CPI Composite Y/Y: 2.1% v 2.1%e

Fixed Income Issuance:

  • (ES) Spain Debt Agency (Tesoro) sold total €5.0B vs. €4.5-5.5B indicated range in 2023, 2025, 2033 and 2044 Bonds
  • Sold €2.0B in 0.35% July 2023 SPGB; Avg yield: 0.336% v 0.440% prior; Bid-to-cover: 1.61x v 2.88x prior
  • Sold €1.176B in 1.60% Apr 2025 SPGB bond; Avg Yield: 0.699% v 1.073% prior; Bid-to-cover:1.71x v 1.94x prior
  • Sold €743M in 2.35% July 2033 SPGB; Avg Yield: 1.830% v 1.723% prior; Bid-to-cover: 1.99x v 1.96x prior
  • Sold €1.087B in Oct 5.15% 2044 SPGB bond; Avg Yield: 2.353% v 2.775% prior; Bid-to-cover: 1.33x v 1.25x prior
  • (FR) France Debt Agency (AFT) sold total €8.494B vs. €7.5-8.5B indicated range in 2021, 2022 and 2024 Bonds
  • Sold €2.409B in 0.0% Feb 2021 Oat; Avg Yield: -0.46% v -0.30% prior; Bid-to-cover: 3.25x v 1.97x prior
  • Sold €1.889B in 3.00% Apr 2022 Oat; Avg yield: -0.34% v -0.26% prior; Bid-to-cover: 2.71x v 1.91x prior
  • Sold €4.196B in 0.0% Mar 2024 Oat; Avg Yield: 0.03% v 0.10% prior; Bid-to-cover: 1.97x v 2.42x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 flat at 384.2, FTSE +0.2% at 7643, DAX -0.5% at 12634, CAC-40 -0.2% at 5363, IBEX-35 -0.7% at 9723, FTSE MIB -1.0% at 21891, SMI +0.1% at 8562, S&P 500 Futures -0.2%]
  • Market Focal Points/Key Themes: European Indices come off the highs, lead by the Dax which is weighed lower by Automakers following a profit warning from Car giant Daimler, citing potential auto tariffs and clamp down on diesel emission cars. BMW and Volkswagen also trade lower in sympathy. Elsewhere Dixons Carphone rebounds following there full year results, whilst Bpost falls after seeing FY EBIT at lower end of prior range. In the Healthcare space Novo Nordisk trades higher after its diabetes drug showed positive results. Looking ahead notable earners include Kroger, Darden and Patterson Companies.

Movers

  • Consumer Discretionary Dixons Carphone [DC.UK] +4.2% (Earnings), Page Group [PAGE.UK] +3.5% (Analyst upgrade)
  • Industrials Daimler [DAI.DE] -4.1% (Profit warning), BMW [BMW.DE] -3.2%, Volkswagen [VOW3.DE] -2.1% (In sympathy with Daimler), Bpost [BPOST.BE] -7.5% (Mid term outlook), Chemring [CHG.UK] +0.8% (Earnings)
  • Healthcare Novo Nordisk [NOVOB.DK] +4.3% (Trial data)

Speakers

  • ECB’s Villeroy (France) reiterated that inflation was moving in the right direction but might be a bit less certain on where we were in the economic cycle. Risk of a global trade war is no longer unthinkable
  • SNB Quarterly Policy Statement reiterated its view that CHF currency (franc) remained highly valued while FX market remained fragile. It also reiterated that negative interest rates and FX intervention pledge remained essential. SNB maintained its 2018 GDP growth forecast but did raise its CPI forecast to 0.9%. It noted that the risks to its baseline scenario were more to the downside
  • Norway Central Bank (Norges) Policy Decision noted that the vote was to keep policy steady was unanimous . It tweaked its language on 1st potential rate hike to be likely in Sept (**Note: prior view was ‘after summer). Outlook suggested a cautious approach to rate hikes and saw gradual hikes in the years ahead. Upturn in economy was continuing and saw wage inflation further out
  • Norway Central Bank (Norges) Gov Olsen post rate decision press conference reiterated its earlier statement that Sept rate hike was most likely scenario
  • SNB’s Jordan post rate decision press conference stated that was keeping an eye on ECB policy. He did not see any reason to change its policy and would not give forecasts on its rate path
  • Eurogroup chief Centeno: Greece had complied with all prior bailout actions. Eurogroup to deliver on Greek debt package
  • Italy Interior Min Salvini (also Dep PM) Confident that EU will be able to reach an agreement on immigration
  • Italy Senate Finance Committee said to have named Euro-skeptic Bagnai as its head
  • Ireland Foreign Min Coveney: Doubt that will see sufficient progress by end of Jun for Brexit talks
  • Germany Finance Ministry cut its Q3 capital market issuance by €6B to €37B. Implementing the reduction by cutting the offer volumes at seven of the 13 nominal-bond auctions scheduled in 3Q
  • Iraq Oil Min Al-Luaibi: Working to narrow the differences with Saudi officials. Was in favor keeping production at current level through end of 2018
  • OPEC Secretariat said to be looking at higher production quotas if the group raises output
  • Saudi Arabia Energy Ministry Al-Falih: Needed to release supplies to market as over compliance by OPEC was 1M bpd. Some members have stated that they could not increase supplies. World to face 1.6-1.8M bpd oil supply deficit in H2 and could not let this happen

Currencies

  • USD maintained its firm tone against the major pairs in the session.
  • EUR/USD was probing the lower end of the 1.15 level after reports circulated that Italy appointed a Euro-skeptic to head its Senate Finance Committee. The news sent Italian yield s higher
  • USD/JPY in the mid-110 area aided by comments on Wed by US Secretary of Commerce Wilbur Ross who noted that he did not think the Chinese want a trade war any more than we did
  • GBP/USD was in the lower end of the 1.31 area ahead of the BOE rate decision. Cable was weaker on the back of shaky political situation in the UK despite the recent govt victory on the meaningful exit vote. Analysts also noted that a dovish split in today MPC vote could further weigh upon the Pound currency
  • EUR/NOK was lower by 0.7% to test below 9.40 level after Norway Central Bank gave a specific month for its 1st potential rate hike.

Fixed Income

  • Bund Futures trade 16 ticks higher at 161.48 as the conciliatory US tone damps haven bid. Upside targets 162.25 followed by 162.75, while a return lower targets the 158.75 level.
  • Gilt futures trade at 122.86 higher by 10 ticks following the move from US Treasuries. Support continues stands at 121.75 then 120.25, with upside resistance at 123.85 then 124.25.
  • Thursday’s liquidity report showed Wednesday’s excess liquidity fell from €1.845T to €1.840T. Use of the marginal lending facility fell from €97M to €83M.
  • Corporate issuance saw Volkswagen and Danske pay up to attract to less in the primary market

Looking Ahead

  • (UK) BOE Gov Carney’s annual Mansion House speech (evening local time)
  • (IL) Israel May Leading ‘S’ Indicator M/M: No est v 0.4% prior
  • (PT) Portugal Apr Current Account: No est v €0.3B prior
  • (PT) Bank of Portugal June Economic Bulletin
  • (AR) Argentina Jun Consumer Confidence: No est v 36.1 prior
  • (TW) Taiwan Central Bank (CBC) Interest Rate Decision: Expected to leave Benchmark Interest Rate unchanged at 1.375% (no set time)
  • 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)
  • 05:50 (FR) France Debt Agency (AFT) to sell €1.5-2.0B in 2027, 2028 and 2047 inflation-linked bonds (Oatei)
  • 06:00 (IL) Israel Apr Manufacturing Production M/M: % v 0.3% prior – 06:00 (RO) Romania to sell Bonds
  • 06:45 (US) Daily Libor Fixing
  • 07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to leave Interest Rates unchanged at 0.50%
  • 08:00 (BR) Brazil Mid-Jun IBGE Inflation IPCA-15 M/M: 1.0%e v 0.1% prior; Y/Y: 3.6%e v 2.7% prior
  • 08:00 (PL) Poland Central Bank (NBP) Jun Minutes
  • 08:05 (UK) Baltic Dry Bulk Index
  • 08:30 (US) Jun Philadelphia Fed Business Outlook: 29.0e v 34.4 prior
  • 08:30 (US) Initial Jobless Claims: 220Ke v 218K prior; Continuing Claims: 1.71Me v1.697M prior
  • 08:30 (CA) Canada May ADP Payrolls Report: No est v +30.2K prior
  • 08:30 (CA) Canada Apr Wholesale Trade Sales M/M: 0.3%e v 1.1% prior
  • 08:30 (US) Weekly USDA Net Export Sales
  • 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 15th: No est v $461.0B prior
  • 09:00 (US) Apr FHFA House Price Index M/M: 0.5%e v 0.1% prior
  • 09:00 (EU) Eurogroup Finance Ministers meet in Luxembourg
  • 10:00 (EU) Euro Zone Jun Advance Consumer Confidence: 0.0e v 0.2 prior
  • 10:00 (US) May Leading Index: 0.4%e v 0.4% prior
  • 10:30 (US) Weekly EIA Natural Gas Inventories
  • 13:00 (US) Treasury to sell 30-Year TIPS Reopening
  • 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to raise Overnight Rate by 25bps to 7.75%
  • 15:00 (AR) Argentina May Trade Balance: -$0.6Be v -$0.9B prior
  • 16:30 (US) Fed to release Dodd-Frank bank stress test results
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