Norges Bank will leave rates unchanged at today's meeting. There are no signs of a severe economic downturn in current data. Based on the various factors affecting the central bank rate path, we expect the new rate path to indicate a 50% probability of a rate cut in Q2. The NB decision will provide relief for the NOK but it will be short-lived as the oil price is in free fall. Real money funds should maintain high FX hedge ratios on the NOK, while leveraged funds should stand on the sideline until there are clear indications that the oil price has stabilised, see also Norges Bank preview: No immediate rate cut published yesterday. Sweden releases CPI and unemployment data.
The long awaited result of the second TLTRO will be announced at 11:10 CET. We look for a take-up of only EUR120bn, a bit lower than the consensus estimate of EUR148bn (according to Bloomberg). However, we need to see the repayment of the LTRO on Friday as well to see the net effect on liquidity from the TLTRO. It is unlikely that the ECB will get a high liquidity boost from the TLTRO and it is expected to need to use government bond purchases in the new year to get a meaningful increase in its balance sheet. We now look for government bond purchases already in Q1 15, see We expect the ECB to announce government bond purchases in Q1 published yesterday.
US retail sales for November will also be in focus. Black Friday sales were disappointing but it is not always a good guide for overall sales. However, we do look for a slightly softer report than consensus with total sales rising 0.1% m/m (consensus 0.4% m/m) but mainly due to transitory factors. The underlying picture for US consumers is strengthening on all fronts, as gasoline prices drop, employment is strong, wage growth is picking up and wealth is growing.
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