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Fall in output kills off hopes of Q3 recovery The 1.5% fall in German industrial production in June kills off any hopes that the strong orders data published yesterday marked the beginning of a recovery. On the contrary, with business surveys all pointing …
7th August 2019
While much of the market’s focus has been on China, Switzerland appears set to become the first country to meet all three of the US Treasury’s criteria of being a ‘currency manipulator’ later this year. However, if the SNB cuts interest rates, as we and …
German opinion polls suggest that there is a growing chance that the next federal government, which will be formed after elections due by late 2021, will be a coalition including the Green party. However, hopes that this will prompt a much larger fiscal …
6th August 2019
Germany and Italy remain the euro-zone’s weak spots July’s final euro-zone PMI is consistent with continued weak GDP growth at the start of Q3. And the PMI surveys also confirmed that Italy and Germany remain the currency union’s weak spots. While Italy’s …
5th August 2019
July surveys point to continued weak growth The slowdown in euro-zone GDP growth from 0.4% q/q in Q1 to 0.2% in Q2 was in line with our forecast and the ECB’s. (See here .) We don’t yet have an expenditure breakdown for the euro-zone as a whole, but the …
2nd August 2019
Swedish economy to flirt with recession… The 0.1% q/q fall in Swedish GDP in Q2 is unlikely to be the final word on the matter given that the data are almost certain to be revised in September. (See here .) Nonetheless, the release adds to signs that the …
Retail sales growth likely to slow further The jump in retail sales in June follows a fairly sharp contraction in May and feeble growth in April, and means that retail sales growth slowed in Q2 overall. With the boost from falling inflation now behind us …
Fall in Swiss inflation adds to pressure on the SNB The unexpected fall in Swiss inflation in July, and signs of a deepening downturn in the industrial sector, will only strengthen the resolve of the SNB to resist the rising franc. There is a growing …
Losing pace into Q3 The sharp fall in Norway’s manufacturing PMI in July adds to signs that the economy is losing momentum and lends support to our view that the Norges Bank will hike rates by less than investors expect this year. Meanwhile, the weak PMI …
1st August 2019
Case for package of ECB stimulus measures in September strengthens The raft of weak economic data published this morning strengthens the case for the ECB to announce a package of stimulus measures at its next meeting in September. The slowdown in …
31st July 2019
Another weak survey supports the case for an ECB rate cut in September July’s decline in the euro-zone Economic Sentiment Indicator (ESI) is consistent with our view that, after probably slowing to 0.2% q/q in Q2, GDP growth in the currency union will …
30th July 2019
The decline in Swedish GDP in Q2 will make it harder for the Riksbank to sit on the fence. With the economy unlikely to find much support in H2, the rising prospect of a recession lends further support to our forecast that the krona will fall sharply by …
Dovish ECB to make life difficult for the SNB Having seen the Swiss franc post multiple fresh two-year highs against the euro early in the week, the SNB will have welcomed the drop in the currency after the ECB meeting on Thursday. The fall was mirrored …
26th July 2019
At Thursday’s press conference, the ECB laid the groundwork for policy easing in September. The change to its forward guidance suggests that a rate cut is pretty much a done deal. But the Bank also “tasked the relevant committees” with looking into other …
The Swiss franc has been the best performing G10 currency over the past three months, despite falling back a bit after the ECB meeting on Thursday. We think that monetary policy as well as safe-haven flows will continue to support it against the euro …
The apparent confirmation this afternoon that the ECB is inching towards loosening policy lends further support to our view that more rate cuts are on the cards in Denmark and Switzerland too. As we had expected, the ECB left its policy settings unchanged …
25th July 2019
The market reaction to today’s ECB press conference suggests that President Draghi was not as dovish as some investors had hoped for. But the big picture is that it seems clear that policy loosening is coming. We expect the Bank to cut its deposit rate in …
Fall in Ifo adds to evidence of prolonged economic weakness July’s decline in the Ifo Business Climate Index is consistent with the message from the PMI that the German economy made a very slow start to Q3. We still suspect that the ECB will wait until …
If it is introduced (which is far from certain) a tiered deposit rate would reduce the cost of negative interest rates for banks, but it would do so by only a trivial amount. Its main purpose would be to help to build support for, or buy off opposition …
24th July 2019
Decline in PMI bolsters case for looser monetary policy July’s euro-zone PMI survey points to continued weak GDP growth and declining price pressures, bolstering the case for the ECB to loosen policy at tomorrow’s meeting. The fall in the headline …
While recent market attention has been on the ECB and Fed, the rise in the Swiss franc has ratcheted up the pressure on the SNB. As a result, investors have come around to our view that the Bank will push the boundaries of monetary easing by cutting rates …
23rd July 2019
Survey won’t change the ECB’s mind about loosening policy The latest ECB Bank Lending Survey adds to the evidence that the euro-zone economy will remain sluggish. The euro-zone does not seem to be on the brink of recession, but continued slow growth …
It is becoming harder for the Riksbank to brush aside mounting signs of weakness in domestic demand. We expect it to turn more dovish, and the krona to weaken, over the second half of the year. The Riksbank’s reasonably upbeat assessment about the outlook …
22nd July 2019
Franc leaves exporters with a mountain to climb The widening in Switzerland’s trade surplus in June (data released on Thursday) was driven in large part by weakness in imports and masked a continued slowdown in export growth. The rise in the value of the …
19th July 2019
What are investors expecting from the ECB? Next week, we think that the ECB will alter its forward guidance in two ways. First, it is likely to say that interest rates will remain “at present or lower ” levels at least through the middle of next year. And …
The ECB is likely to change its forward guidance to signal that a rate cut is coming... … and it might also add an explicit reference to the possibility of re-launching QE. All this would confirm investors’ expectations that looser policy is on the way. …
18th July 2019
Markets Overview – We think that a combination of policy loosening by major central banks, an increase in investor risk aversion, and mounting trade tensions will lead to bond yields in Switzerland and the Nordics staying lower for longer and equities …
17th July 2019
The improvement in some of the recent economic data suggests that the risk of an imminent recession is low. But it does not suggest that the economy is about to rebound. We expect growth to remain subdued over the rest of the year, with quarterly GDP …
Overview – Economic growth is likely to remain anaemic this year and to slow further in 2020 even if downside risks, such as a US auto tariff or no-deal Brexit, do not materialise. The downturn in the German manufacturing sector is spreading to other …
16th July 2019
The Riksbank has fallen well behind the curve The minutes of the Riksbank’s July monetary policy meeting, released this morning, offered little in the way of surprises. As was the case in the February meeting, the decision to hold the repo rate unchanged …
12th July 2019
France defies the gloom While the German and Italian economies are in the doldrums, France seems to be doing much better – for now at least. We think GDP expanded by around 0.4% q/q in Q2, following a decent 0.3% increase Q1. Industrial production rose by …
Given the parallels with Brexit, the recent escalation in the spat between the EU and Switzerland has filled many column inches over the past month. (To re-cap, after the Swiss government refused to sign off on the proposed new treaty, the EC followed …
Strong rise in industrial output in May, but GDP growth still slowed in Q2 May’s strong increase in euro-zone industrial production should allay concerns about the wider economy falling into recession, but it is still consistent with GDP growth slowing in …
A lot has happened since the Governing Council’s policy meeting on 6 th June, so the account published today has arguably been superseded by events. But it does confirm that even five weeks ago the Bank was gearing up for action. The account also hints at …
11th July 2019
Irish economy slowing as no-deal Brexit risk increases After strong growth in Q1, economic growth in Ireland appears to have slowed a touch, which is likely to in part reflect concerns about Brexit. While Ireland looks set to continue growing more quickly …
Core inflation likely to fall back into 2020 While core inflation in Sweden edged up once again in June, we expect weak domestic demand to weigh on underlying price pressures over the second half of the year and into 2020. Having risen to a seven-month …
Above-target core inflation supports Norges Bank’s hawkish bias The larger-than-expected fall in the headline Norwegian inflation rate in June is unlikely to change the Norges Bank’s hawkish bias. With core price pressures still running above target, it …
10th July 2019
New Democracy’s clear victory in Greece’s parliamentary elections yesterday will be welcomed by investors. But it will not be a game changer for the economy, not least because the government will still be constrained by its membership of the single …
8th July 2019
Slump in German manufacturing continues The small increase in output in May does not signal the end of the Germany’s manufacturing downturn. On the contrary, it now looks almost certain that production declined in Q2 overall, contributing to a sharp …
Developments this week make us more confident in our view that the ECB will change its forward guidance at its meeting on 27 th July, before cutting its deposit rate in September and announcing in October that it will re-launch QE. The first of these …
5th July 2019
Swiss market shrugs off loss of ‘equivalence’ The Swiss stock market took the expiration of the ‘equivalence’ regime with the EU in its stride this week, mirroring the buoyant performance of other equity markets. The Swiss Market Index (SMI) jumped by …
The latest economic data, together with the nomination of Christine Lagarde for ECB president, make us more confident in our view that the ECB will cut interest rates and re-launch QE before the year is out. All of the activity data point to a slowdown in …
4th July 2019
Growth in retail sales likely to have slowed in Q2 May’s euro-zone retail sales data were weaker than expected and support our view that GDP growth in the bloc slowed to 0.2% q/q in Q2. Looking ahead, lower inflation is likely to raise households’ …
Stable, but set to fall to zero Swiss inflation held steady at a very low rate in June and we expect it to fall to zero during the second half of the year on the back of the stronger franc. With deflationary fears set to come back on the agenda, we think …
The decision by the Riksbank to leave its repo rate on hold at -0.25% this morning came as no surprise, but the fact that it left its (in our view) optimistic forecast for interest rates unchanged bucks the dovish trend by other central banks, notably the …
3rd July 2019
June surveys round off a disappointing Q2 While the Composite PMIs for June were flat for Spain and edged up for Italy, the overall picture remains one of weak economic growth in the second quarter. And with price pressures remaining weak, there is every …
Yesterday’s announcement that Christine Lagarde will succeed Mario Draghi leaves us even more confident that the ECB will loosen monetary policy in the coming months. We think the Bank is likely to cut its deposit rate in September and re-launch QE before …
The jump in euro-zone core inflation in June seems to have largely reflected temporary factors. More generally, a range of measures of underlying inflation suggest that price pressures remain subdued. This should encourage the ECB to loosen policy sooner …
2nd July 2019
Swiss pension funds and life insurers have been among the losers from negative interest rates, but the SNB is unlikely to follow the Bank of Japan’s example of targeting long-term bond yields to limit the damage on the sector. Given that we now expect …
Labour market recovery continues despite manufacturing slowdown May’s euro-zone unemployment data showed that the steady recovery in the region’s labour market continued, despite the likely slowdown in GDP growth in Q2. But with business surveys remaining …
1st July 2019
