Market movers ahead
In the euro area, the June ECB meeting is on Thursday. Focus will be on potential changes to the forward guidance in a less dovish direction. However, we do not expect the ECB to make any changes, to avoid any risk of an unwarranted tightening.
In the UK, the single most important event will be the general election, also on Thursday. Though the gap between Labour and the Conservatives has narrowed, polls continue to point towards a win for Prime Minister Theresa May.
We expect Chinese inflation to increase only moderately, while we expect PPI to come down fast, as commodity price increases have turned around.
In Scandinavia, we are due to receive inflation data from Norway, where we estimate core inflation has declined. Hereby, inflation continues to undershoot Norges Bank expectations.
Global macro and market themes
The global economy is still in fairly good shape, although starting to lose some tailwind.
It would be a mistake to think that political risks are now off the global financial agenda. The risks have now (once again) moved back to the US.
We argue that we are still in a bond-friendly environment. However, the global economy is losing steam and inflation has peaked.
If the ECB changes course, it would be seen as premature and inflation expectations would dive further - and the result would be a 'bearish flattening' of the yield curve.
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