Danske Daily – 17 July 2017

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It is a very quiet day in terms of data releases with the only figure due for release being the US Empire manufacturing PMI. Consensus estimates a decline but it should not go down to the levels seen in April and May this year.

Later this week, all eyes will be on the ECB meeting, where we expect it to remove its readiness to increase QE in size (but to keep the flexibility in terms of duration) and to have discussed tapering after President Mario Draghi rejected such discussions at the latest meeting in June. In our view, a tapering discussion will be in line with the latest communication from Draghi, that in a situation where the economy continues to recover, monetary policy tightening could be needed in order to keep the policy stance ‘broadly unchanged’. We still believe the ECB will continue QE but at a reduced pace of EUR40bn per month in H1 18. See more in ECB preview: another minor hawkish twist , 14 May 2017.

The minutes from the Riksbank meeting in July are due to be released Tuesday and could attract additional attention as the Riksbank’s statement deviated from the communication among global central banks by not including any signs of hawkishness. The Riksbank argued that growth is strong and inflation is approaching 2%, but that continued expansionary policy is needed to stabilise inflation at around 2%. This is very different from the thinking among global central banks that strong growth today will translate into higher wage pressure later.

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