US markets were closed yesterday, but Asian equities are slightly down after Monday’s Greek talks failed and fresh data showed Chinese house prices falling further in January. Short German bond yields put in fresh record lows yesterday, while oil prices (Brent) and the EURUSD have been broadly unchanged.
Eurogroup talks on Greece collapsed again yesterday. The Greek Finance Minister Varoufakis called the options Greece was presented absurd and unacceptable. He argued Greece was not bluffing, it had no plan B. At the same time, he said he was ready to do whatever it takes to reach an agreement, and meet the other side halfway during the next couple of days.
Norges Bank will probably lower its wage forecast at its March meeting, which, all else equal, points to a lower rate path. Fresh information from the Norwegian Technical Calculation Committee for Wage Settlements yesterday supported the view that Norges Bank’s wage forecast is too high.
Day ahead
Today’s most important key figure for the big markets will probably be the ZEW index. We expect it to show fresh optimism about the state of the German economy following the ECB’s QE announcement and fairly strong Q4 GDP numbers.
Nordic focus will center on the Swedish inflation numbers given the Riksbank decision last week. We expect the CPI to be down by 1.2% m/m in January with fuel prices as a key driver. As always there is considerable uncertainty when it comes to the January forecast. The key reason is effects of the revised basket of goods, including up as well as downside risks, are hard to predict. Our CPIF inflation forecast is somewhat above the Riksbank’s view for the next six months. However, there are still reasons to believe that the Riksbank will try to stimulate the economy further.
UK CPI numbers and a number of second-tier US numbers – including Empire State, TIC data and the NAHB index – are also due today.
Rates
A fairly thin economic calendar and the US market being closed yesterday resulted in calm trading in European rate markets on Monday, ahead of the final showdown of the Greece-Troika talks.
Short German bond yields reached record-low levels, and are now trading slightly below the ECB´s deposit facility at -20 bp.
After solid performance in Scandi rate markets during the past weeks, bond performance was on the weaker side yesterday. All eyes will be on the Swedish January inflation numbers today, which have tended to be notoriously difficult to forecast.
FX
The USD broad index has challenged the uptrend since October 2014 and looks vulnerable in the near term. If Fed’s QE history is a guide, the EUR/USD could still creep higher to above 1.15, and should we get a surprise from Greece and a better ZEW reading today, there is room for more upside. Meanwhile, the USD will take its cue from Wednesday’s FOMC minutes.
SEK regained some of last week’s losses yesterday on the overall USD weakness. The SEK will still remain vulnerable in the near term, as the Riksbank indicated readiness to act even between meetings. The Swedish CPI today and inflation expectations tomorrow will be crucial for the krona – in particular, worsening inflation expectations should unnerve the Riksbank.
NOK was among the outperformers again yesterday, as oil prices have crept higher: the Brent oil price is now almost 40% above the January bottom! After the Riksbank’s move last week the markets started to speculate about whether Norges Bank will follow the Riksbank, but with higher oil prices and inflation such speculations will diminish and strengthen the NOK. EUR/NOK should keep trending toward the 200-day moving average @ 8.46.
Nordea