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August’s small decline in euro-zone inflation won’t deter the ECB from ending its net asset purchases this year. But core inflation is still not on a sustained upward trend, so the Bank will be in no hurry to raise interest rates. We think that the first …
31st August 2018
Denmark had a weak first half of the year, but timelier evidence points to slightly faster growth in Q3. Meanwhile, Finland’s economy continues to perform well. … Finland & Denmark GDP …
Strong economic growth is fuelling inflationary pressures in both Norway and Sweden. So we expect the Norges Bank to follow through on its guidance and raise rates by 25bp next month. We doubt that Sweden’s Riksbank will be far behind and think that it …
30th August 2018
Although the EC’s measure of euro-zone economic sentiment fell again in August, it remains at a high level and consistent with fairly strong growth. But underlying price pressures are building very slowly, supporting the ECB’s cautious stance. … EC …
August’s surveys suggest that while economic growth is slowing in Switzerland, it remains very strong in Sweden. This is primarily due to differing conditions in the manufacturing sector, which might reflect the fact that the Swiss franc is historically …
Although the Central Bank of Iceland left policy unchanged today, it expressed concern about rising inflation expectations ahead of wage negotiations later this year. So domestic inflationary pressures are set to build further and we continue to expect …
29th August 2018
Germany’s current account surplus is likely to narrow over the coming years, but we suspect that it will remain very large. So there is little chance that economic rebalancing in Germany will help to ease trade tensions within the EU or across the …
28th August 2018
The upward pressure on the Swiss franc eased this week and our forecasts for monetary policy in Switzerland suggest that the currency will continue to depreciate against the euro over the next couple of years. Meanwhile, the latest opinion polls suggest …
24th August 2018
Greece’s exit from its bailout on Monday was widely hailed by European policymakers as a sign of success, but its problems are far from over. Meanwhile, comments from President Trump emphasised that, despite the supposed tariff ceasefire between the US …
Even after its recent rise, we still think that the Swiss franc will weaken against the euro over the coming years as the Swiss National Bank lags the ECB in tightening monetary policy. But sustained demand for safe-haven assets suggests that the …
23rd August 2018
August’s small increase in the euro-zone PMI suggests that the region’s economy is continuing to perform well in Q3, which will reassure the ECB that it is right to be normalising monetary policy very gradually. … Euro-zone Flash PMIs …
The slowdown in Norway’s housing market is weighing on the economy. But other sectors are performing much better, so this won’t be enough to stop the Norges Bank from raising interest rates next month. … Norway GDP & Switzerland IP …
Following September’s general election, Sweden looks set for a period of political uncertainty that might dent economic activity. But this is likely to prove temporary and we doubt that it would prevent the Riksbank from tightening monetary policy or the …
21st August 2018
We suspect that, due to technical reasons, the ECB will increase its purchases of Italian government bonds in October. This might help to prevent yields from shooting up if Italy’s Government submits a very expansionary Budget to the European Commission …
The sell-off in Italian bonds continued this week, and although we think that Italian yields have further to rise, we suspect that contagion will remain limited. Meanwhile, data released this week for the euro-zone showed that the economy did better in …
17th August 2018
The further appreciation of the franc this week strengthens our view that the SNB will be very cautious about policy tightening, keeping rates on hold until 2020. Meanwhile, with inflationary pressures building in Norway, we think the Norges Bank was …
Developments over the past few weeks have made it more likely that Italy’s Government will implement some form of fiscal stimulus in next year’s Budget. This is likely to cause bond yields to rise further. However, contrary to some Italian politicians’ …
The latest inflation data in Switzerland and the Nordic economies show that underlying inflation is fairly low. But we doubt that this will stop the Norges Bank or Riksbank from raising interest rates this year. … Soft inflation won’t stop rate rises in …
16th August 2018
After leaving policy unchanged today, the Norges Bank looks almost certain to begin raising interest rates at its next meeting in September. But even as the central bank tightens monetary policy over the next few years, we think that falling oil prices …
Portugal’s banks have strengthened their balance sheets significantly and look set to support economic growth over the coming years. However, the already-high level of private sector debt is a concern. … Portugal’s banks to support investment-led …
15th August 2018
The upward revision to euro-zone GDP growth in Q2 will make policymakers at the ECB more confident that they are right to be winding down their asset purchases. … Euro-zone GDP (Q2), IP (Jun.) & German ZEW …
14th August 2018
The stronger-than-expected expansions in Germany and the Netherlands in Q2 provide some hope that the euro-zone economy may have grown more strongly in Q2 than initially estimated. This should encourage the ECB that it is right to wind down its asset …
The renewed appreciation of the Swiss franc this week as investors sought out safe haven assets will not have been welcomed by the SNB. But the franc is still weaker than it has been over the past few years so we do not expect the SNB to alter its stance. …
10th August 2018
While worries about the exposure of euro-zone lenders to Turkey weighed on the euro and European banking stocks on Friday, the economic spillovers to the region should be fairly modest. Meanwhile, comments from Italy’s Deputy Prime Minister Luigi di Maio …
Underlying inflation is still fairly weak in the Nordic economies. But given increased capacity utilisation and rising wage pressures in both Sweden and Norway, we expect both the Riksbank and the Norges Bank to start raising interest rates before the end …
The accord between Presidents Trump and Juncker to aim for free US/EU trade in non-auto industrial goods poses a minor threat to some EU sectors, including chemicals and plastics. But existing tariffs are low and the differences between them are even …
9th August 2018
Non-energy inflation in Sweden has been unexpectedly weak in recent months, prompting investors to push back their expectations of the first rate rise into 2019. But there is evidence of rising cost pressures, which we think will give the Riksbank …
8th August 2018
Q2’s slowdown in GDP growth to just 0.3% q/q dealt a blow to hopes that the softness of growth in the first quarter would be a one-off. While no breakdown is available yet, timely data from France and Spain suggest that the weakness reflected a drag from …
7th August 2018
June’s industrial production and trade figures suggest that the previously booming German economy is already feeling the effects of trade tensions. But with the domestic economy in good shape and given the recent ceasefire in the tariff war, we expect …
The Italian Treasury’s latest debt buyback has helped to contain a rise in yields related to concerns over Budget plans. But such operations can offer only temporary respite. We see the Italian 10-year yield rising to 3.5% by year-end, even assuming that …
6th August 2018
July’s PMIs for the Nordic and Swiss countries, which were published this week, suggest that these countries continued their strong performance at the start of Q3. Swiss inflation data released earlier today provided little evidence that this was …
3rd August 2018
Disappointing euro-zone Q2 GDP data published this week have made our forecast of a 2.2% rise in GDP this year look optimistic. But July’s business surveys were more upbeat and suggest that a marked slowdown is unlikely to materialise. Meanwhile, the rise …
July’s rise in Swiss inflation was driven by faster energy and food inflation, while underlying price pressures remained very weak. And with the franc set to remain strong by historical standards, we expect the Swiss National Bank to leave interest rates …
The Spanish economy recorded its smallest quarterly expansion in four years in Q2 and the business surveys weakened again in July, suggesting that the period of very strong growth is at an end. But there is still spare capacity in the labour market, so …
2nd August 2018
The Norges Bank will soon start to tighten monetary policy. But in contrast to the consensus view, we think that as interest rates rise over the next few years, the krone will depreciate against the euro. … Norwegian krone to weaken even as interest rates …
1st August 2018
Even after Q2’s disappointing euro-zone GDP data, we still think that the ECB is unlikely to extend its net asset purchases into next year. But it might vary the reinvestment of funds from its huge bond portfolio in 2019 to keep longer-dated government …
31st July 2018
Q2’s 0.3% quarterly rise in euro-zone GDP was a disappointment given hopes that the slowdown in Q1 reflected temporary factors. We still see growth regaining some pace as the year goes on, but for now the continued slowdown will certainly add to the ECB’s …
July’s very small fall in the EC measure of economic sentiment supports our view that euro-zone growth is slowing only slightly from a strong pace. But producers’ price expectations remain weak and July’s German CPI data point to a lack of underlying …
30th July 2018
The Swedish economy grew very strongly in the first half of the year and is likely to continue performing well. This is set to drive wage growth gradually higher, prompting the Riksbank to raise interest rates at the end of this year. … Swedish GDP (Q2) & …
Given the openness of the Nordic & Swiss economies, their policymakers will have breathed a sigh of relief at the easing of trade tensions this week between the EU and the US. But should the current ceasefire end, we think that Switzerland’s position …
27th July 2018
The easing of trade tensions between the US and EU this week reduces the risk that the US will soon increase tariffs on EU cars, but it still leaves us a long way from any action to reduce trade barriers. Meanwhile, ECB President Draghi’s comments at …
The 0.2% expansion in France’s GDP in Q2 was disappointing. But since temporary factors weighed on growth, we still think that euro-zone growth picked up in Q2. … French GDP (Q2, 1st …
The ECB made no changes to its policy or forward guidance today and strongly endorsed financial markets’ expectations for interest rates to remain on hold until autumn next year. It also made clear that it would not be rushed into early rate hikes by …
26th July 2018
The Swedish economy continues to perform well. And with inflationary pressures gradually rising, we expect the Riksbank to raise interest rates this year. … Sweden Econ. Tend. Survey (Jul.) & Unemploy’t …
Government bond yield curves in the Nordics and Switzerland have flattened this year, but we doubt that this signals that recessions are imminent in any of these economies. … Flatter yield curves not a cause for …
25th July 2018
The very low level of long-term bond yields across the euro-zone suggests that there is no urgent need for the ECB to copy the US Fed’s “Operation Twist” by replacing short-dated securities with longer-dated ones. But this is a tool that it could deploy …
July’s very small fall in the Ifo Business Climate Indicator (BCI) left it still pointing to strong German GDP growth, which will encourage the ECB to maintain a fairly optimistic tone when it meets tomorrow. … German Ifo Survey …
Swiss and Nordic financial markets have been a mixed bag over the past month. Equities in most countries have risen, supported by continued fairly strong economic growth. But equities in Norway and Iceland have fallen. In Norway, this largely reflects the …
24th July 2018
The ECB’s Q2 Bank Lending Survey adds to the evidence that the euro-zone economy will continue to perform well. And there is little sign that the uncertainty about the Italian Government’s policies has led to a tightening of credit conditions in the …
July’s fall in the euro-zone PMI comes as something of a disappointment but the index is still consistent with a decent pace of GDP growth at the start of Q3. Accordingly, the ECB is likely to push ahead with its plans to normalise policy very gradually. …
