Market Movers
The main event will be the FOMC meeting tonight. There will be no press conference following today’s announcement. Instead, focus will be on the statement released in connection with the announcement. We expect the Fed’s rhetoric to turn more hawkish, which will keep our long-held call for a September hike alive.
In particular, we expect the Fed to signal stronger confidence about the outlook for the US economy. The main risk to our call for a September rate hike have been the so-called international developments and it will be interesting to see how the FOMC relates to the recent turmoil on the Chinese equity market.
In Germany and France consumer confidence data is expected to remain unchanged compared to the previous month.
We have a series of data releases out of Scandinavia this morning including unemployment rates in Norway and Denmark and the Swedish KI confidence survey.
Selected Market News
Risk sentiment improved yesterday supported by a stabilisation in the Chinese equity market. The bourses in Europe and the US ended the day higher, while the EUR reversed some of its gains from the previous day. The 10 year US-Germany yield spread widened a few basis points as the German government bond ended the day broadly unchanged, while yields on 10-year US treasuries rose 3bp to 2.25%.
In the FX market, the GBP gained against both the EUR and USD yesterday on solid Q2 GDP figures, showing that UK growth rebounded in Q2 to 0.7% q/q from 0.4% q/q in Q1. See UK: Growth rebounded in Q2 - focus now on next MPC meeting for details.
Scandi Markets
We expect that the Norwegian unemployment rate (LFS) edged up a notch to 4.3 % in May. In that case, the figures will confirm that the labour market continues to deteriorate and keep the door open for another rate cut in September.
In Denmark, employment figures for May are due for release. We expect that employment picked up further in May but possibly at a slower pace than previously as other key economic figures have been weak during the spring. Retail sales in June are also due for release but note that there are better indicators for the development in private consumption.
It is time for the Swedish KI confidence survey this morning. The various confidence components with the exception of retail trade show a sideways to slightly downward trend so far this year. With unruly Greece negotiations, volatile China stocks and rising uncertainty about global companies' earnings performance, there is a clear risk that the tendency persists. At the same time, consumers seem satisfied with their situation, retailers are optimistic and house prices and mortgage credit are reaching new highs, so there are some bright spots too. It is doubtful whether this changed last month. Inflation expectations should have been affected in a downward direction by the lower oil price.
