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11 Dec 2014
ECB tLTRO, SNB, US retail sales eyed - RBS
FXStreet (Bali) - The FX Strategy Team at RBS breaks down the main risk events for Thursday, including ECB's allotment of its second tLTRO operation, the SNB and Norges Bank monetary policy decisions and US retail sales, among others.
Key Quotes
"Tomorrow the ECB announces the allotment of its second tLTRO operation. The ECB pledged last week to review the progress of its existing measures in early 2015 when determining whether more is needed, and the tLTRO result is a significant part of those measures. As a result, despite the ECB opting not to give firm balance sheet targets, there appears to be a somewhat binary impact of the tLTRO allotments – smaller balance sheet expansion via the tLTROs today implies a necessity for larger expansion of the balance sheet later. A weak take-up of the tLTRO may prove to be a EUR negative as it increases the likelihood of larger, and more expansive, measures to expand the balance sheet in the future. Our European credit research team discusses the specifics behind our forecast of a €120-170bn take-up – well below the maximum allowable €318bn – here. A revision to the flash German inflation reading for November is released tomorrow as well, though we expect the tLTRO allotment to be the key EUR-event tomorrow."
"The SNB and Norges Bank each hold monetary policy decisions tomorrow. Particularly after Swiss voters rejected the gold referendum, we expect the SNB to leave interest rates unchanged and reiterate its commitment to defend the EUR/CHF floor. We see risks of downward revisions to the growth and inflation profile, particularly after SNB President Jordan warned of rising deflation risks in a recent speech. Norges Bank is unlikely to cut the benchmark rate in November due to relatively robust inflation and growth figures along with a weaker currency. There is a risk that the rate path is lowered in 2015 largely on the back of heightened risks to investment emanating from lower oil prices."
"US retail sales are released for November as well. The headline figures are quoted in nominal terms, meaning falling fuel prices in November could be reflected in lower headline sales. That may offset a solid gain from auto sales – we expect November sales to rise 0.3% m/m on both headline and core (ex autos and gas). Initial jobless claims in the US, CPI in Sweden, and a speech by Bank of Canada Governor Poloz round out tomorrow’s event calendar."
Key Quotes
"Tomorrow the ECB announces the allotment of its second tLTRO operation. The ECB pledged last week to review the progress of its existing measures in early 2015 when determining whether more is needed, and the tLTRO result is a significant part of those measures. As a result, despite the ECB opting not to give firm balance sheet targets, there appears to be a somewhat binary impact of the tLTRO allotments – smaller balance sheet expansion via the tLTROs today implies a necessity for larger expansion of the balance sheet later. A weak take-up of the tLTRO may prove to be a EUR negative as it increases the likelihood of larger, and more expansive, measures to expand the balance sheet in the future. Our European credit research team discusses the specifics behind our forecast of a €120-170bn take-up – well below the maximum allowable €318bn – here. A revision to the flash German inflation reading for November is released tomorrow as well, though we expect the tLTRO allotment to be the key EUR-event tomorrow."
"The SNB and Norges Bank each hold monetary policy decisions tomorrow. Particularly after Swiss voters rejected the gold referendum, we expect the SNB to leave interest rates unchanged and reiterate its commitment to defend the EUR/CHF floor. We see risks of downward revisions to the growth and inflation profile, particularly after SNB President Jordan warned of rising deflation risks in a recent speech. Norges Bank is unlikely to cut the benchmark rate in November due to relatively robust inflation and growth figures along with a weaker currency. There is a risk that the rate path is lowered in 2015 largely on the back of heightened risks to investment emanating from lower oil prices."
"US retail sales are released for November as well. The headline figures are quoted in nominal terms, meaning falling fuel prices in November could be reflected in lower headline sales. That may offset a solid gain from auto sales – we expect November sales to rise 0.3% m/m on both headline and core (ex autos and gas). Initial jobless claims in the US, CPI in Sweden, and a speech by Bank of Canada Governor Poloz round out tomorrow’s event calendar."