Riksbank Hikes Rates To End Era Of Negative Rates, Weak UK Retail Sales Data Played Down

Fundamental analysis of Forex market


  • Soft UK Nov retail sales data was downplayed as it did not contain the Black Friday sales (as it did back in 2018)
  • Sweden Central Bank hiked (as expected) to end its era of negative rates after 5 years
  • Norway Central Bank kept its policy steady (as expected). Appeared finished with rate increases for now but did not show any dovish feathers
  • BOE expected to keep policy steady later today


  • New Zealand Q3 GDP Q/Q: 0.7% v 0.5%e; Y/Y: 2.3% v 2.3%e
  • Australia Nov Employment Change: +39.9K v +15.0Ke; Unemployment Rate: 5.2% v 5.3%e
  • BOJ kept policy steady with IOER unchanged at -0.10% and maintained its policy framework of “QQE with Yield Control” around 0.00% and asset purchases at annual pace of ¥80T
  • China govt announced new list for tariff exemptions for US chemical products and said to relate to 6 different US chemicals products (includes polyethylene). New tariff exclusions for certain US goods were effective from Dec 26 2019 to Dec 25 2020.


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  • ECB strategic review said to considering dropping reference to money supply as an inflation guide and instead focus on credit being used


  • PM Johnson to reportedly push through an increase of £33.9B into the NHS by 2023/24 once the MPs have voted through his Brexit bill. Also said to be planning to cut business rates for half a million small businesses with standard retailer discount to rise from 33% to 50% at a cost of ~£320M


  • House of Representatives voted to impeach Pres Trump (as expected). With all republicans opposing the move while Jared Golden (Maine), Jeff Van Drew (N.J.), Collin Peterson (Minn.) were only Democrats to vote No. Both impeachment charges passed
  • Article 1 Abuse of Power and Article 2 Obstruction



  • Indices [Stoxx600 -0.08% at 414.58, FTSE +0.01% at 7,541.48, DAX -0.15% at 13,202.22, CAC-40 +0.03% at 5,961.34, IBEX-35 -0.21% at 9,602.00, FTSE MIB +0.04% at 23,639.42, SMI +0.18% at 10,575.50, S&P 500 Futures +0.07%]
  • Market Focal Points/Key Themes: European indices mixed following indices in Asia lower and slightly higher US futures. Hornbach up and Exel Industries down following earnings results. XLMedia dives 19% after cutting FY19 revenue and EBITDA outlook. Kudelski down after lowering FY19 EBITDA outlook on Skidata restructuring and Goodwin falls sharply after reporting 1H profit decline and expecting similar trend in in 2H. Swatch down as the Swiss Competition Commission (COMC) commented that it wants to prohibit the company from supplying mechanical movements to third parties starting in January 2020; furthermore, November Swiss watch exports decreased 3.5% y/y. Circassia tanks 13% after BeyondAir terminated their licensing agreement for LungFit PH for material breach. Clariant up after divesting the Masterbatches unit for $1.6B. Akka Technologies up on acquisition of Norwegian Data Respons. Nicox trading higher following study update. Notable earners today include Accenture, ConAgra Brands, Darden Restaurants, Rite Aid and Sanderson Farms.


  • Consumer discretionary: Swatch Group [UHR.CH] -1.5% (comments on COMC dictate; Swiss exports)
  • Healthcare: Nicox [COX.FR] +7% (study update)
  • Industrials: Goodwin [GDWN.UK] -16% (earnings)
  • Technology: Akka Technologies [AKA.FR] +4% (acquisition), XLMedia [XLM.UK} -15% (cuts FY19 guidance)


  • Sweden Central Bank (Riksbank) Policy Statement fine-tuned its forward guidance to read that the Repo Rate was expected to remain at 0.00% in coming years (prior ‘ holding steady for prolonged period after Dec 2019’). Economy was expected to be balanced in coming years. Inflation had been close to target since start of 2017 and saw that condition remaining so going forward. If economic outlook and inflation prospects changed then monetary policy might need to be adjusted . Decision to hike was not unanimous as Dep Govs Breman and Jansson entered reservations against the rate hike
  • Sweden Central Bank (Riksbank) Gov Ingves post rate decision press conference stated that forfecasts saw the Repo Rate at 0.00% for the coming years. Policy remained expansionary
  • Norway Central Bank (Norges) Policy Statement reiterated its forward guidance that Repo Rate would likely remain at current level coming period. Weaker NOK currency (Krone) implied a higher rate path as it would likely to push up inflation; wage growth to remain moderate. Upturn in economy appeared to be more moderate than assumed. Growth in mainland economy is slowing
  • EU court said to rule that Spain govt could not bar jailed Catalan leader from serving on EU Parliament; person had parliamentary immunity
  • Scotland First Minister Sturgeon stated that would consider all options if UK govt rejected demands for new referendum on independence
  • Indonesia Central Bank Policy Statement noted that monetary policy remain accommodative and today’s decision to leave rates unchanged was consistent with efforts to anchor inflation and support GDP growth. To use monetary operations to maintain liquidity
  • Taiwan Central Bank (CBC) Policy Statement noted that it would maintain an approproiate loose monetary policy. Saw the current inflation outlook as staying stable
  • BOJ Gov Kuroda: post rate decision press conference reiterated stance that would not hesitate to add to easing if risk of achieving price target was jeopardized. Appropriate to guide policy with an easing bias; negative rates were appropriate and rate cuts to remain an option. Could not deepen negative rates indefinitely as it could impact the financial sector ; must watch the side-effects. Risks to price momentum had not increased and must stick to 2% inflation target. BOJ reiterated that risks remain high from overseas economies but did see some improvement recently. To closely watch the developments in US-China trade talks. Active Japanese govt spending to support domestic demand and the size of package was appropriate. Domestic consumption trend largely unchanged following the Oct sales tax increase. No issue with current shape of Japanese yield curve but would not rule out the change of changing the bond target in the future. Believed that super long-end yields should steepen more; not thinking of targeting the shorter-term rates at this time
  • China Commerce Ministry (MOFCOM) spokesperson Gao Feng reiterated that was in close contact with US on trade but had no new information at this time on talks. Trade deal content to be disclosed after deal signed.

Currencies/Fixed Income

  • GBP/USD was steady and back above the 1.31 level but remained well below the cycle highs reached after the UK general election as fresh concerns about risks of a no-deal Brexit re-emerged recently. Soft Nov retail sales data was downplayed as it did not contain the Black Friday sales (as it did back in 2018) Focus turns to BOE rate decision later today and unanimously expected to keep policy steady.
  • EUR/NOK was softer by 0.5% after Norway Central bank kept its Deposit rate unchanged (as expected). Dealers noted that Norges failed to present any dovish tone in its commentary and believed that a weak Krone currency could push inflation higher.

Economic Data

  • (NL) Netherlands Nov Unemployment Rate: 3.5% v 3.5% prior
  • (CH) Swiss Nov Trade Balance (CHF): 3.9B v 3.5B prior; Real Exports M/M: -0.8% v -1.2% prior; Real Imports M/M: +0.5% v -3.5% prior; Swiss Watch Exports Y/Y: -3.5% v +1.7% prior
  • (ID) Indonesia Central Bank (BI) left the 7-Day Reverse Repo unchanged at 5.00% (as expected)
  • (FR) France Dec Business Confidence: 106 v 104e; Manufacturing Confidence: 102 v 99e; Production Outlook Indicator: -6 v -2e; Own-Company Production Outlook: 7 v 3 prior
  • (TW) Taiwan Central Bank (CBC) left the Benchmark Interest unchanged at 1.375% (as expected) for its 14th straight pause in the current easing cycle
  • (SE) Sweden Central Bank (Riksbank) raised Repo Rate by 25bps to 0.00% (as expected); moves out of negative rates for the 1st time in 5 years
  • (NO) Norway Central Bank (Norges) left the Deposit Rates unchanged at 1.50% (as expected)
  • (IS) Iceland Dec CPI M/M: 0.1% v 0.1% prior; Y/Y:2.0 % v 2.7% prior
  • (PL) Poland Nov Sold Industrial Output M/M: -5.8% v -6.2%e; Y/Y: 1.4% v 0.3%e
  • (PL) Poland Nov PPI M/M: -0.2% v 0.0%e; Y/Y: -0.1% v +0.2%e
  • (UK) Nov Retail Sales (ex-auto/fuel) M/M: -0.6% v +0.4%e; Y/Y: 0.8% v 2.0%e
  • (UK) Nov Retail Sales (includes auto/fuel) M/M: -0.6% v +0.2%e; Y/Y: 1.0% v 2.1%e

Fixed Income Issuance

Looking Ahead

  • 05:30 (HU) Hungary Debt Agency (AKK) to sell box v nds (3 tranches)
  • 06:00 (UK) Dec CBI Retailing Reported Sales: -5e v -3 prior; Total Distribution: No est v -15 prior
  • 06:00 (BR) Brazil CONAB Sugar Production Report
  • 06:00 (CZ) Czech Republic to sell 1-month Bills
  • 06:00 (RO) Romania to sell 12-month bills; Avg Yield: % v 3.26% prior; Bid-to-cover: x v 2.05x prior
  • 06:00 (RO) Romania to sell 4.5% Jun 2024 Bonds; Avg Yield: % v 3.89% prior; Bid-to-cover: x v 1.23x prior
  • 06:45 (US) Daily Libor Fixing
  • 07:00 (UK) Bank of England (BOE) Interest Rate Decision: expected to leave Interest Rate unchanged at 0.75%; to maintain Asset Purchase Target at £435B
  • 07:00 (UK) Bank of England (BOE) Dec Minutes
  • 08:00 (PL) Poland Central Bank Dec Minutes
  • 08:00 (RU) Russia Gold and Forex Reserve w/e Dec 13th: No est v $546.6B prior
  • 08:00 (BR) Brazil Central Bank Q4 Inflation Report (QIR)
  • 08:00 (UK) Daily Baltic Dry Bulk Index
  • 08:30 (US) Q3 Current Account Balance: -$122.0Be v -$128.2B prior
  • 08:30 (US) Dec Philadelphia Fed Business Outlook: 8.0e v 10.4 prior
  • 08:30 (US) Initial Jobless Claims: 225Ke v 252K prior; Continuing Claims: 1.67Me v 1.667M prior
  • 08:30 (CA) Canada Oct Wholesale Trade Sales M/M: -0.4%e v +1.0% prior
  • 08:30 (CA) Canada Nov ADP Payroll Estimates: No est v -22.6K prior
  • 08:30 (BR) Brazil Nov Tax Collections (BRL): 126.1Be v 135.2B prior
  • 08:30 (US) Weekly USDA Net Export Sales
  • 09:00 (BE) Belgium Business Confidence: -3.5e v -3.9 prior
  • 10:00 (US) Nov Leading Index: +0.1%e v -0.1% prior
  • 10:00 (US) Nov Existing Home Sales: 5.44Me v 5.46M prior
  • 10:30 (US) Weekly EIA Natural Gas Inventories
  • 11:30 (US) Treasury to sell 4-week and 8-week bills
  • 12:00 (BR) Brazil Nov Total Formal Job Creation: +47.8Ke v +70.9K prior
  • 13:00 (US) Treasury to sell 5-Year TIPS Reopening
  • 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: expected to cut Overnight Rate by 25bps to 7.25%
  • 14:00 (AR) Argentina Q3 Current Account Balance: -$2.0Be v -$2.6B prior
  • (UR) Ukraine Q3 Final GDP Q/Q: No est v 0.7% prelim; Y/Y: 4.2%e v 4.2% prelim
  • (AR) Argentina Dec Consumer Confidence Index: No est v 41.35 prior
  • (MX) Citibanamex Survey of Economists
  • 16:00 (KR) South Korea Nov PPI Y/Y: No est v -0.6% prior
  • 16:00 (NZ) New Zealand Dec ANZ Consumer Confidence Index: No est v 120.7 prior
  • 18:00 (HU) Hungary Dec Consumer Confidence Index: No est v -9.2 prior; Business Confidence: No est v 7.0 prior; Economic Sentiment: No est v 2.8 prior
  • 18:30 (JP) Japan Nov National CPI Y/Y: 0.5%e v 0.2% prior; CPI Ex-fresh food (core) Y/Y: 0.5%e v 0.4% prior; CPI Ex-Fresh Food/Energy (core-core) Y/Y: 0.7%e v 0.7% prior
  • 18:50 (JP) BOJ 3Q Money Flow
  • 19:01 (UK) Dec GfK Consumer Confidence: -14e v -14 prior
  • 19:01 (UK) Dec Lloyds Business Barometer: No est v 9 prior
  • 20:30 (CN) China PBOC adjustment on 1-year and 5-year Prime Rate
  • 21:00 (NZ) New Zealand Nov Credit Card Spending M/M: No est v -1.5% prior; Y/Y: No est v 2.5% prior
  • 22:00 (CN) China to sell 50-Year Upsized Government Bond
  • 22:30 (JP) Japan to sell 3-Month Bills
  • 23:00 (MY) Malaysia Nov CPI Y/Y: 1.1%e v 1.1% prior