Back
11 Dec 2015
EZ key events coming up next week - TDS
FXStreet (Guatemala) - Analysts at TD Securities explained the key events taking place next week.
Key Quotes:
"Riksbank Policy Decision (15 Dec): The Riksbank has been fixated on ensuring a gradual appreciation of SEK. Economic fundamentals there are solid: economic growth is healthy and core inflation should be well-supported going forward (despite a dip down in November). The recent appreciation in KIX perhaps represents the biggest risk for policy as it touches October lows, but with the disappointing ECB now out of the way, we think the Riksbank will see less pressure on SEK going forward and thus be comfortable to stay on the side-lines. That said, a cut in the policy rate can’t be completely ruled out, but we don’t think it would be warranted.
2. Norges Bank Policy Decision (17 Dec): The painful adjustment to lower oil prices continues, and this month’s further deterioration in prices will not help: adjustment to past declines is still not complete, as evidenced by the latest dismal industrial production growth and the Regional Network Report. We therefore anticipate a cut next week by the Norges Bank in an effort to prop up the non-energy sectors of the economy, with one more rate cut to come in 16Q1 before they can comfortably pass the baton over to fiscal policy to support the economy. Headline and core inflation are both above target, but this won’t be of concern to the Norges Bank, who see it as a side-effect of boosting economic growth via a weaker exchange rate.
3. December Flash PMIs (16 Dec): Uncertainty remains somewhat elevated heading into this week’s flash PMI estimates. The French services PMI is driven in part by sentiment, which we’re still gauging post-Paris attack effects. We think the data will come in largely in line with last month’s reading, but note that a disappointing ECB might weigh on business sentiment somewhat. The same goes for the German manufacturing PMI, with the added complication that the impending longer-than-usual VW shutdowns over the holiday season might weigh broadly on the auto industry and hence on the manufacturing PMI. Our models point to an increase to about 53.5, but if sectoral factors weigh heavily, we could end up somewhere closer to consensus for a decline to 52.5."
Key Quotes:
"Riksbank Policy Decision (15 Dec): The Riksbank has been fixated on ensuring a gradual appreciation of SEK. Economic fundamentals there are solid: economic growth is healthy and core inflation should be well-supported going forward (despite a dip down in November). The recent appreciation in KIX perhaps represents the biggest risk for policy as it touches October lows, but with the disappointing ECB now out of the way, we think the Riksbank will see less pressure on SEK going forward and thus be comfortable to stay on the side-lines. That said, a cut in the policy rate can’t be completely ruled out, but we don’t think it would be warranted.
2. Norges Bank Policy Decision (17 Dec): The painful adjustment to lower oil prices continues, and this month’s further deterioration in prices will not help: adjustment to past declines is still not complete, as evidenced by the latest dismal industrial production growth and the Regional Network Report. We therefore anticipate a cut next week by the Norges Bank in an effort to prop up the non-energy sectors of the economy, with one more rate cut to come in 16Q1 before they can comfortably pass the baton over to fiscal policy to support the economy. Headline and core inflation are both above target, but this won’t be of concern to the Norges Bank, who see it as a side-effect of boosting economic growth via a weaker exchange rate.
3. December Flash PMIs (16 Dec): Uncertainty remains somewhat elevated heading into this week’s flash PMI estimates. The French services PMI is driven in part by sentiment, which we’re still gauging post-Paris attack effects. We think the data will come in largely in line with last month’s reading, but note that a disappointing ECB might weigh on business sentiment somewhat. The same goes for the German manufacturing PMI, with the added complication that the impending longer-than-usual VW shutdowns over the holiday season might weigh broadly on the auto industry and hence on the manufacturing PMI. Our models point to an increase to about 53.5, but if sectoral factors weigh heavily, we could end up somewhere closer to consensus for a decline to 52.5."