Market Movers ahead
Next week's key event is the Jackson Hole symposium where ECB president Mario Draghi is among the speakers for the first time in three years. In 2014, he hinted at QE and now the focus is on tapering signals. Fed members should not reveal anything dramatic.
Data wise, a number of survey indicators for August will give additional insight into the strength of the global economy at the beginning of H2. The figures due for release include the US and euro area PMIs, German ifo expectations as well as ZEW expectations and consumer confidence in the euro area.
In Scandi markets focus will be on Norwegian GDP growth in Q2 and the oil investment survey for Q3, Swedish labour market data as well as Danish employment, retail sales and consumer confidence.
Global macro and market themes
We stress that risks to our newly updated yield forecasts are that the drivers we see for higher yields in 2018 materialise much earlier than we forecast. This is especially the case for the US fixed income market.
First of all, our business cycle model, Macroscope, is predicting that the US economy will re-accelerate in the coming months. This is contrary to market consensus.
Secondly, we are in a situation where the market is positioned for lower yields. When the market is caught wrong-footed it often leads to exaggerated moves.
Thirdly, the market has flattened the US money market curve and has only priced a 40% probability of a new rate hike. We think the market underestimates the risk of a December rate hike.
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