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Riksbank Becomes The Latest Central Bank To Put A Dovish Spin On Its Forward Guidance

Notes/Observations

  • Central banks continue with dovish surprise on rate outlook amid waning risk appetite and concerns over a global-growth slowdown resurfaced
  • Swedish Riksbank tweaked its forward guidance so that the Repo Rate would remain at current level for somewhat longer period of time than was forecasted back in February
  • BOJ kept its policy steady but clarified its forward guidance to reinfoirce it will not hike anytime soon
  • Weak GDP data from South Korea dashed expectations of any further rate hikes

Asia:

  • BOJ left its policy unchanged (as expected) with Interest Rate on Excess Reserves (IOER) unchanged at -0.10%and maintaining its policy framework of “QQE with Yield Control” around 0.00% with asset purchases at annual pace of ÂĄ80T. BOJ revised its forward guidance and now would keep extremely low rates at least through around Spring 2020 (from prior view of to maintain the current extremely low interest rates for an extended period of time)
  • BOJ Quarterly Outlook for Economic Activity and Prices cut FY19/20 GDP growth from 0.9% to 0.8% and FY20/21 GDP from 1.0% to 0.9%. It maintained FY19/20 core CPI (ex-sales tax) at 0.9% (affirms including sales tax 1.1%) while cutting FY20/21 core CPI from 1.4% to 1.3% (including sales tax 1.5% to 1.4%)
  • South Korea Q1 Preliminary GDP Q/Q: -0.3% v +0.3%e (weakest since late 2008); Y/Y: 1.8% v 2.5%e
  • China PBOC Deputy Gov Liu Guoqiang reiterated its prudent monetary policy as overall being appropriate, neither tight nor loose; policy stance had not changed. Market operations were to adjust short term liquidity only
  • China PBoC announced it would set up a policy framework to implement relatively low RRR for small and medium banks and would use the funds released to support private and small companies

Europe/Mideast:

  • UK Conservative party members said not to be backing the push to change leadership rules that was aimed at launching a new ‘no-confidence’ vote on PM May – 1922 Committee’s Brady confirmed that asking the PM for a departure timetable in the event of a Brexit deal was not passing so MPs had clarity as to when she’s leaving if Brexit was not resolved
  • National Institute of Economic and Social Research (NIESR) forecasted Q1 UK GDP growth at +0.2%; pushed back forecast for next BOE rate hike until Aug 2020 (from Aug 2019)

Americas:

  • BOC Gov Poloz post rate decision press conference noted that the domestic slowdown would prove to be temporary. BOC discussion before the rate announcement was a little bit skeptical of the most negative data and needed to see proof that a slowdown was temporary (reminder BOC kept its policy steady but its Statement dropped reference to future rate hikes and stressed that accommodative policy continued to be warranted)

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

  • Indices [Stoxx600 -0.08% at 390.58, FTSE -0.30% at 7,449.21, DAX +0.04% at 12,317.92, CAC-40 -0.10% at 5,570.56, IBEX-35 +0.07% at 9,462.92, FTSE MIB +0.15% at 21,757.50, SMI +0.27% at 9,681.50, S&P 500 Futures +0.06%]
  • Market Focal Points/Key Themes: European Indices trade mostly lower following a mixed session in Asia overnight, with notable weakness in China as the Shanghai composite declined over 2%. US futures trade little changed, with the Nasdaq outperforming following strong results from Microsoft and Facebook after the close. On a busy morning for corporate earnings, shares of German listed Bayer rises on earnings and affirmed outlook; with UBS helping the Swiss SMI outperform wit profits and Revenue ahead of forecasts. Elsewhere Carrefour rises on inline results, with Michelin, ASM International, SSAB, Atlas Copco, Carpetright, among other names rising on earnings. PSA Group shares fall following Q1 Revenue numbers; Nokia declines almost 10% on a miss on the both the top and bottom line, with Societe Bic another notable decliner after missing forecasts, while Barclays, Worldline, Assa Abloy among others decliners on earnings. Elsewhere shares of Sainbury’s falls over 5% after the CMA locked its transaction with Asda on competition grounds, while talks with Deutsche Bank and Commerzbank have also discontinued. Deutsche Bank also released up beat prelim Q1 results which sees the shares trade over 4% higher. Looking ahead notable earners include DOW component 3M, as well as Raytheon, UPS, Comcast, Bristol Myers, Abbvie, Hersheys and Southwest Airlines among others.

Equities

  • Consumer discretionary: Carrefour [CA.FR] +4% (earnings), Delivery Hero [DHER.DE] +3% (earnings; raised outlook), Metso [METSO.FI] +3.5% (earnings), Carpetright [CPR.UK] +31% (trading update)
  • Consumer staples: Sainsbury [SBRY.UK] -5% (merger blocked)
  • Energy: Tullow Oil [TLW.UK] -2.5% (trading update)
  • Financials: Deutsche Bank [DBK.DE] +2.5%, Commerzbank [CBK.DE] -2.5% (discontinued merger talks; DB prelim earnings), UBS [UBSG.CH] +1.5% (earnings), Barclays [BARC.UK] -1.5% (earnings), Swedbank [SWEDA.SE] -3% (earnings; establishes internal Anti-Financial Crime unit), Royal Bank of Scotland [RBS.UK] -1% (CEO steps down)
  • Healthcare: Bayer [BAYN.DE] +3.5% (earnings)
  • Industrials: PSA [UG.FR] -0.5% (earnings), SSAB [SSABA.SE] +4.5% (earnings)
  • Technology: Dialog Semiconductor [DLG.DE] +2.5% (positive profit alert), ATOS {ATOS.FR] 2.5% (earnings)
  • Materials: Wacker Chemie [WCH.DE] -3% (earnings)

Speakers

  • ECB Economic Bulletin reiterated that ample degree of accommodation is still necessary
  • Sweden Central Bank (Riksbank) Policy Statement revised its view on forward guidance and now saw Repo Rate remaining at current level for somewhat longer period with the next potential rate hike near year-end or in early 2020 (revised from 2nd half of 2019). Riksbank also extended its QE program and would buy govt bonds for nominal value of SEK45B from July 2019 to December 2020. Members Floden, Ohlsson opposed Riksbank Bond purchase extension; consider that further purchases will not contribute to monetary policy target attainment in a clear way. Lastly it noted that strong economic activity in Sweden and rising inflationary pressures abroad indicated that the inflation would continue to remain close to target going forward
  • Sweden Central Bank (Riksbank) Gov Ingves post rate decision press conference stated that needed to adjust monetary policy to the economic situation. Economy was about the same compared to Feb but getting harder to predict the consequences of Brexit. Reiterated that Riksbank did not have a target for the exchange rate; had to live with fluctuations in the currency. SEK currency weakness was partly due to monetary policy but had less impact on inflation than expected. Reiterated view that SEK currency would gradually appreciate
  • Norway Central Bank (Norges) Q1 Lending Survey: Household and corporate credit standards were broadly unchanged. Banks saw household credit demand rising in Q2
  • German Bundesbank took notice that Deutsche Bank and Commerzbank had halted merger talks but adding that both banksweare solid and stable
  • Czech Central Bank Vice Gov Mora said to back a interest rate hike at the upcoming policy decision on May 2nd but the vote to depend on updated staff projections
  • BOJ Gov Kuroda post rate decision press conference began by expressing he wanted to make clear the stance on persistent easing. Clarification of forward guidance aimed at dismissing expectations for a rate hike after the sales tax increase. He conceded that was fully possible that the time frame under forward guidance could exceed the spring of 2020 thus could keep low rates beyond that time period. Reiterated that virtuous economic cycle was in place but consumer prices had remained somewhat weak. Expected CPI to pick up towards the 2% target gradually but likely would take time. Reiterated that risks were tilted to the downside for both economy and prices. To adjust policy swiftly as needed to maintain momentum towards the inflation target
  • Indonesia Central Bank Policy Statement noted that the decision to keep policy steady was consistent with efforts to strengthen external stability. To expand policy to support growth and strengthen liquidity availability for banks
  • Iraq Oil Min Ghadhban stated that sought to keep oil prices stable with markets well supplied. Iraq committed to OPEC production cut agreement and would not increase production outside the OPEC+ agreement. Would assess market needs at next OPEC meeting
  • IEA chief Birol stated that expected Iraq to add 1.2M bpd in 10 years to reach 6M bpd production in 2030

Currencies/Fixed Income

  • The USD held on to its recent gains as weak inflation and growth data overseas propelled the greenback. Central banks continued with dovish surprise on respective rate outlook amid waning risk appetite and concerns over a global-growth slowdown resurfaced.
  • EUR/USD was softer below the 1.1150 area and not too far off from its lowest level since July 2017. The recent soft IFO data out of Germany only added to the currency’s woes. Dealers also cited that economic and political concerns in Italy were also causing pressure. ECB economic bulletin also stressed that risks in the Euro Zone were tilted to the downside
  • USD/JPY could not sustain any momentum to hold above the 112 level for the time being even after BOJ kept its policy steady and clarified its forward guidance to reinfoirce it would not hike anytime soon
  • The SEK currency (Kroner) was the session’s big loser after the Riksbank put a more dovish spin on its rate path. Riksbank tweaked its forward guidance so that the Repo Rate would remain at current level for somewhat longer period of time than was forecasted back in February and now saw the next rate hike near year-end or in early 2020 (prior was in H2 2019). EUR/SEK was higher by over 1.25% to test above 9.69 level

Economic Data

  • (NO) Norway Q1 Industrial Confidence: 6.9 v 9.0 prior
  • (FI) Finland Mar Preliminary Retail Sales Volume Y/Y: 1.0 v 1.6% prior
  • (DK) Denmark Mar Retail Sales M/M: 0.7% v 0.3% prior; Y/Y: 0.5% v 1.3% prior
  • (ES) Spain Q1 Unemployment Rate: 14.7% v 14.5%e
  • (ES) Spain Mar PPI M/M: -0.2% v +0.2% prior; Y/Y: 2.4% v 1.7% prior
  • (AT) Austria Feb Industrial Production M/M: 0.6% v 0.7% prior; Y/Y: 5.9% v 867% prior
  • (SE) Sweden Apr Consumer Confidence: 95.8 v 95.0e; Manufacturing Confidence: 108.4 v 107.0e; Economic Tendency Survey: 102.7 v 101.0e
  • (ID) Indonesia Central Bank (BI) left the 7-Day Reverse Repo Rate unchanged at 6.00% (as expected)
  • (SE) Sweden Central bank (Riksbank) left the the Repo Rate unchanged at -0.25% (as expected); pushed back its next potential rate hike and expended its QE bond buying program
  • (RO) Romania Mar M3 Money Supply Y/Y: 9.0% v 9.2% prior
  • (GR) Greece Feb Retail Sales Value Y/Y: -2.3% v -3.2% prior; Retail Sales Volume Y/Y: -3.2% v -2.6% prior

Fixed Income Issuance

  • None seen

Looking Ahead

  • (AR) Argentina Apr Consumer Confidence Index: No est v 34.8 prior
  • (CO) Colombia Mar Industrial Confidence: No est v 5.1 prior; Retail Confidence: No est v 31.8 prior
  • 05:30 (ZA) South Africa Mar PPI M/M: 0.5%e v 0.3% prior; Y/Y: 5.5%e v 4.7% prior
  • 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds (3 tranches)
  • 06:00 (UK) Apr CBI retailing Reported Sales: 0e v -18 prior; Total Distribution: No est v -6 prior
  • 06:00 (CA) Canada Apr CFIB Business Barometer: No est v 55.9 prior
  • 06:45 (US) Daily Libor Fixing
  • 07:00 (TR) Turkey Central Bank (CBRT) Interest Rate Decision: expected to leave One-Week Repo Rate unchanged at 24.00%
  • 07:00 (UK) Ukraine Central Bank (NBU) Interest Rate Decision: expected to cut Key Rate by 25bps to 17.75%
  • 07:00 (BR) Brazil Apr FGV Consumer Confidence: No est v 91.0 prior
  • 08:00 (BR) Brazil Mid-Apr IBGE Inflation IPCA-15 M/M: 0.7%e v 0.5% prior; Y/Y: 4.7%e v 4.2% prior
  • 08:30 (US) Initial Jobless Claims: 200Ke v 192K prior; Continuing Claims: 1.68Me v 1.653M prior
  • 08:30 (US) Mar Preliminary Durable Goods Orders: +0.8%e v -1.6% prior; Durables Ex Transportation: +0.2%e v -0.1% prior; Capital Goods Orders (Non-defense/ex-aircraft): +0.2%e v -0.1% prior; Capital Goods Shipments (Non-defense/ex-aircraft): +0.1%e v -0.1% prior
  • 08:30 (US) Weekly USDA Net Export Sales
  • 08:30 (ES) ECB’s De Guindos (Spain)
  • 09:00 (RU) Russia Gold and Forex Reserve w/e Apr 12th: No est v $491.6B prior
  • 09:00 (MX) Mexico Feb Retail Sales M/M: 0.0%e v 1.9% prior; Y/Y: 0.6%e v 0.9% prior
  • 09:30 (BR) Brazil Mar Current Account Balance: $0.0Be v -$1.1B prior; Foreign Direct Investment (FDI): $7.9Be v $8.4B prior
  • 10:30 (US) Weekly EIA Natural Gas Inventories
  • 11:00 (US) Apr Kansas City Fed Manufacturing Activity: 8e v 10 prior
  • 12:00 (FR) France Pres Macron: speech on ‘Yellow Vest’ protesters’ demands
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