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Quotes from Nordea Markets: -The EUR has been under pressure due to geopolitical tensions, which are already weighing on activity, as well as due to the potential for a boost to Eurosystem liquidity from ECB TLTROs this autumn. -Our view of a gradual and hawkish re-pricing of USD rates (both fixings and forward rates), while EUR rates remain range-bound, lead us to lower our EUR/USD forecast to 1.32 in the 3-months horizon(from 1.36) -Longer out, we expect the US economy to outpace the Euro area and this should keep interest rate spreads supportive for the USD going forward. Our end-2015 EUR/USD forecast remains 1.25. |
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Source: FxWire Pro
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Nordea Markets
Daily outlook for developed markets bond yields
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Quotes from Nordea Markets: -Core bonds continued to rally on both sides of the Atlantic, and the curve bull-flattened further, as geopolitical tensions and risk aversion continued. The German 10-year yield retreated by 4bp to a new record-low of 1.06%, while the corresponding US yield plummeted by 6bp yesterday and has fallen further to below 2.40% overnight, the lowest in more than a year. The German 2-year yield briefly visited negative territory for the first time in more than a year. -Core bonds are set to remain supported today, and yields will continue to fall. The German 10-year yield continues to target 1%, and is likely to tumble below this level in the near term. Tensions in Ukraine appear only to be increasing, while the news that President Obama has authorized air strikes in Iraq to halt the advance of militants only adds to general worries. All these tensions ahead of the weekend should turn into more flight-to-safety demand of core bonds and risk aversion. |
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Source: FxWire Pro
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ISM indices pointing to strong performance in US economy going forward
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Quotes from Nordea Markets: -The US non-manufacturing ISM index surged to its highest since late 2005, jumping from 56.0 to 58.7. The details were broadly positive as well, with new orders leaping to 64.9 and the employment index rising to 56.0. Only a fall in new export orders was a small disappointment. -With the manufacturing ISM index at 3-year highs, the ISM indices are pointing to strong performance in the US economy going forward. It would be surprising, if such performance did not start to be reflected in also wage and inflation pressures picking up later this year. |
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Source: FxWire Pro
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Daily outlook for developed markets bond yields
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Quotes from Nordea Markets: -German bond yields headed higher yesterday, with the 10-year yield rising by 3bp. The US bond market was more resilient and the 10-year yield ended the day close to unchanged. Core bonds yields are likely to reverse yesterday’s increases today, as geopolitical worries persist and equity market sentiment has become more wobbly. -Intra-Euro-zone spreads widened again, with large moves seen in Portuguese and Greek yields, the latter jumping by 25bp in the 10-year sector. The long rally in peripheral bonds has raised an increasing number of questions about how long the gains can continue. In short, even though more volatility will be in store going forward, the rally has probably not run its course yet. |
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Source: FxWire Pro
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US lending environment continues to be supportive of growth
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Quotes from Nordea Markets: -The Fed’s July Senior Loan Officer Survey on bank lending practices showed a continued easing of lending standards for many types of loan categories amid a broad-based pick-up in loan demand. -The lending survey results suggest that the credit environment remains supportive of growth in the US. -However, the results also imply the availability of credit may be a bigger constraint on the US housing market than it is for corporate investment, something that the recent developments in these areas support. |
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Source: FxWire Pro
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Another low eurozone inflation print should not push ECB over the brink to new action
Quotes from Nordea Markets:
-Euro area July inflation printed at 0.4%, painfully low, but as the ECB already pointed out in the July meeting: on the basis of current information, annual HICP inflation is expected to remain at low levels over the coming months, before increasing gradually during 2015 and 2016.
-Hence, another low print should not push the ECB over the brink to new action. Draghi could also point to the fact that several measures of core inflation have been stable over recent months
Daily outlook for developed markets bond yields
Quotes from Nordea Markets:
-Bond yields tried to rise yesterday on the back of a report showing wage pressures picking up in the US, but plunging equity markets soon brought bond yields back lower.
-The German 10-year yield ended the day lower by around 1.5bp, while the corresponding US yield was close to unchanged (but shorter US yields dropped).
-Intra-Euro-zone spreads saw mixed performance, with Portuguese spreads jumping on the back of more banking sector worries around Banco Espirito Santo, which is in need of more capital after heavy losses.
-Core bond yields are likely to head higher today on more news of wage pressures picking up in the US, but further equity weakness should limit the losses for bonds.
Pelias' views 