Market movers today

The key event today will be the Norges Bank meeting, where both consensus and ourselves are looking for a 25bp rate hike.

The Bank of England also meets, but in our view, the bank is firmly on hold. It is one of the small meetings without an updated inflation report or a press conference so we don’t expect much change in the bank’s message. The UK also releases May retail sales.

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A two-day EU summit starts today, where the main focus will be on potential clarity on the front-runners for the EU Commission presidency, ECB presidency other EU top positions. We will also monitor if the EC will formally open an EDP against Italy. On the data front, we expect Euro area consumer confidence for June to stay unchanged.

The US Philly Fed survey and initial jobless claims will add to indications of how much the US economy is slowing. The PMI and Empire indices have pointed to weakness.

Selected market news

Risk sentiment was benign yesterday as the market digested the dovish ECB message from Tuesday and was waiting for the end of the Fed meeting in the evening. The risk rally continued after the Fed meeting. Overall, the Fed was as dovish as it could be without cutting rates at its meeting. In line with our view, there were several important dovish changes to the statement. Most importantly, the Fed removed the wording that it was “patient ” and now said it “will act as appropriate to sustain the expansion ” while also saying that uncertainties have increased. Also dovish was that the FOMC was divided on whether to signal cuts outright this year or not (8 signalling cuts, 8 on hold and 1 hike). We stick to our view that the Fed will cut rates in July by 25bp and deliver a total of 75bp of rate cuts in H2 19 (Jul, Sep, Dec). The trade war is an important risk to our outlook in both directions. For more details, see our FOMC review: Fed as dovish it could be without cutting rates already .

The ECB comments on Tuesday satisfied markets so far, as the blockbuster measure (ECB credibility measures) 5y5y is 12bp higher than prior to the speech; however, a Reuters story suggested that the message from Draghi is not consensus in the GC.

Oil traded in a relatively tight range of around 62USD/bbl, with some volatility. The Brent price dropped on the back of news that OPEC+ finally agreed to meet (1-2 July), as the countries must decide on the new output level. Brent spiked above USD62/bbl on a drop in US crude stocks.

As expected, the BoJ kept its QQE with yield curve control and its forward guidance unchanged at a meeting ending overnight with a 7-2 vote. The BoJ kept its assessment of the economy but it is more concerned about downside risks from overseas economies.

The NIER June confidence survey showed business confidence dropping in all sectors, consumer confidence bounced back slightly. The overall indicator is at its lowest since 2013. Price expectations are down to stable, most notably lower expectations in durable goods.

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