Market movers today

The main economic release today is the US core inflation number. We estimate the CPI core index rose +0.2% m/m in December, implying an unchanged core inflation rate at 2.2% y/y.

In the UK, the monthly GDP estimate for November is due to be released. Given the weak PMIs, do not expect a strong number and estimate another 0.1% m/m (0.3% 3M/3M) increase.

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In Sweden, average house prices for December are due out.

In Denmark, industrial production data for November is due to be released.

Selected market news

Headlines overnight were dominated by several interesting central bank headlines. Fed Chair Jerome Powell spoke yesterday. He emphasised that the Fed is now in a place where it has room to be patient and flexible in terms of further adjustments in monetary policy. On the balance sheet, his message was that it will be substantially smaller than now, but bigger than before the crisis. Fed Vice Chair Richard Clarida followed up on Powell’s message, stressing that the Fed should be forward looking as it would not be prudent to wait until a slowdown before acting. On the balance sheet discussion, he said it will be consistent with the Fed’s goals for monetary policy.

Francois Villeroy expressed caution from the side of the ECB in terms of the next step following the halt of the bond purchase programme in December. He stressed that the ECB wants to be predictable but not recommitted and was keeping its options open amid risks to the outlook for the eurozone economy. While ECB and Fed officials are sounding patient, the Bank of Canada’s Stephen Poloz yesterday conveyed that the base case for the BoC is still that the expected slowdown in economic growth following the slump in oil prices would be only temporary, which means that further interest hikes could still be on the cards.

There was also news on the trade front. Chinese Vice Premier Liu He is scheduled to meet US Trade Representative Lighthizer and Treasury Secretary Steven Mnuchin on 30-31 January to continue talks on a trade deal.

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