Market movers today
In the US, the preliminary Q1 GDP growth est imate is due for release today. There are signs that economic activity slowed in the first quarter, with growth in consumer spending coming out weaker than first expected and the investment indicator not as st rong as previously. The Atlanta Fed suggests GDP growth was 2.0% q/q AR while the NY Fed’s GDP indicat or says 2.8%. We believe the former is more likely than the lat ter. However, we remain opt imistic about full-year GDP growth due to the tax package among others and hence we expect the Fed to cont inue its gradual hiking cycle.
In the UK, the first est imate of GDP growth in Q1 will be released. According to indicators, GDP growth slowed in Q1 compared to Q4 17, the quest ion is more by how much. While the PMIs suggest GDP growth is likely to have slowed to 0.3%, the NIESR GDP est imate is as low as 0.2%. We est imate GDP growth was 0.25%, implying an annual growth rate of 1.4% y/y (don’t be surprised if it is only 1.3%), which is among t he lowest in t he advanced economies. Looking at real wage growt h and business investment s’ int ent ion, it is difficult to see a scenario with much higher GDP growth in the UK this year despite the polit ical agreement on t ransit ion.
In the Scandies, we get Swedish retail sales data, which we expect to be on the weak side, reflect ing very soft sales figures from HUI earlier in the month. Moreover, the monthly household lending numbers are published, which remains upbeat just below 7% y/y but which we expect to moderate going forward amid a slowdown in the housing mark et .
In Norway, we expect the April NAV labour market report to show gross unemployment returning to fall by 1,000 people m/m after Easter distorted last month’s release. T his should take the registered unemployment rate down to 2.3%, which would be in line with Norges Bank’s project ions in t he March monetary policy report and, in isolat ion, lends support to expectat ions of a rate hike in September.
Selected market news
Yesterday, the Riksbank postponed the scheduled t iming of the first rate hike to Q4 this year. Specifically, the revised rate path suggested a 10bp rate hike in October with an addit ional c.55bp worth of hikes unt il the end of 2019. Overall, the decision was softer than expected by markets, which underpins our bearish SEK FX view. Indeed, even the revised inflation forecast seems too opt imist ic given subdued underlying inflation dynamics and we still do not expect any rate hikes this year. For more informat ion on the Riksbank meeting see our comment here.
The ECB unsurprisingly gave no new guidance at yesterday’s meeting. Draghi acknowledged the recent softer data but kept his st rong and broad-based assessment on growth. The meeting confirmed our view that the next step in forward guidance will come in July. Overall pat ience, prudence and persistence remains the guiding ECB principles. See our review here.
This morning, the Bank of Japan (BoJ) kept monetary policy unchanged with an 8-1 vote. Interestingly, the BoJ removed the reference to hit t ing the 2% inflat ion target in the fiscal year 2019 (FY 2019). This is a slight ly dovish twist that should help put an end to exit speculations for some time. The JPY was little changed prior to the press conference (start ing 8:30 CET).
