News & Analysis
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The Norges Bank took a cautious tone today when it announced no change in interest rates over the next couple of years. This is not a total surprise, as the Bank already flagged higher rates from the end of 2022 during its July meeting following a less severe economic shock in Norway than in most other economies.
Yesterday’s throne speech saw these political and credit risks rise to the fore. In combination with the general risk-off tone in markets this week, the speech resulted in the loonie feeling the pressure, extending its slide back towards the 1.34 level – USDCAD is now trading 1.60% higher on the week.
Swiss franc weakens vs euro after SNB sticks with FX interventions and announces to publish data quarterly
The Swiss franc fell to new lows against the euro and dollar this morning after the Swiss National Bank announced to keep rates unchanged and FX intervention at a high pace if necessary, considering the strengthening of CHF. In the short term, the central bank upwardly revised its inflation outlook since June, mainly due to a rise in oil prices.
Chancellor Rishi Sunak is expected to speak in Parliament today at 12:45 BST and give an economic statement that will hopefully include policy proposals. The core of the Treasury response will likely be some kind of targeted or partial wage subsidy scheme to replace the blanket furlough programme that ends in October.
This morning’s Purchasing Managers’ Index releases from September confirmed the bleak picture of the eurozone current state, with the bloc’s services PMI dropping to 47.6 down from August’s 50.5, and the composite PMI falling to 50.1 down from 51.9. In Germany.
QE is the way to go, according to Sweden’s Riksbank which kept rates at zero today and stuck with a flat interest rate projection over the coming years. The central bank pledged to continue its asset purchase programme as it navigates its way through the pandemic, which is exactly what markets expected.
The BoJ brought no policy moves forward, but took an upbeat tone on the economic outlook. In contrast, the Fed’s move towards strengthened forward guidance moved it a step closer to the BoJ’s ultra-accommodative policy stance, raising the prospect of a structurally smaller difference between US and Japanese yields.
GBP Sterling has weakened further against the US dollar and the euro this morning, extending yesterday’s general trends. Both GBPEUR and GBPUSD took a further dive this morning during a speech from Bank of England Governor Andrew Bailey. Speaking at a webinar for the...
Central banks will continue to weigh the implications of the Fed’s dovish turn and recent dollar weakness on domestic inflation outlooks, with a number of meetings this week across the globe from Scandinavia to New Zealand.
In terms of virus cases, the Netherlands reported record surges over the weekend while France saw infections increase to peak levels last seen in April. With France’s Finance Minister Bruno Le Maire testing positive for the virus and infections running at the fastest pace since the start of the outbreak.