Articles
13 December 2019

Key events in developed markets

Another exciting week ahead as the Brexit process finally gets underway after the Conservative party's landslide victory, on top of two central bank meetings and a barrage of US data 

Brexit process set to roll forward following election

Boris Johnson’s Conservative party has gained a large majority at the ballot box, paving the way for the prime minister’s Brexit deal to be ratified in January. That process could begin next week, where following the state opening of the parliament (Queen’s Speech), the initial stages of the Withdrawal Agreement Bill could be completed. That means the UK is most likely set to leave the EU at the end of January. What happens thereafter is pretty uncertain, and the focus will quickly turn to whether the transition period will be extended. We think it will although given this will require the UK to commit to budget payments beyond 2020, talks could become messy.

In the meantime, we’ll also get the Bank of England’s first view on the post-election landscape. With activity stalling and the risks surrounding the jobs market rising, we are likely to see the Bank retain a cautious stance. We’re sceptical about the prospects of a big investment rebound in 2020, but for now, we aren’t fully convinced the BoE will pull the trigger on a rate cut.

US: Another barrage of data, but the Fed is not worried

With the Federal Reserve having clearly indicated contentment with the current state of the economy, markets are unlikely to be too concerned about the upcoming data flow as we head towards year-end. We will be getting a combination of industrial production, housing numbers and personal income and spending. The narrative is likely to continue to be one of manufacturing in recession as a result of the uncertainty caused by trade wars in combination with weak global demand and a strong dollar, although the return to work of 50,000 or so General Motors workers after the conclusion of their recent strike action will lead to a rebound in auto manufacturing output.

Consequently, we expect an unsustainable 0.8%MoM increase in total production for November. Housing numbers are likely to be supported by the decline in mortgage rates while personal spending should hold up fairly well. All this remains consistent with the Fed’s view that their work to support the economy is done. Nonetheless, we continue to see growth risks skewed to the downside for 2020 ad see a strong chance that the Fed will eventually choose to cut interest rates again.

Germany: Ifo to follow the ZEW's trend

After this week’s surprisingly strong ZEW index, the Ifo index should also show an improvement, albeit somewhat weaker than the ZEW index. We mainly expect an increase in the expectations component and a relatively stable current assessment.

Sweden: Riksbank set to exit negative rates

The Riksbank has been pretty clear that despite the mounting economic risks, it wants to press ahead and exit negative rates in December. We’re expecting a 25bp rate hike, but that is likely to be the last. One reason is that next year’s key wage negotiations have the potential to be a little more disappointing than previously hoped.

Last week’s Prospera Sinfo inflation expectation survey showed that both employee and employer organisations were lowering their CPI expectations.

Developed Markets Economic Calendar

Source: ING, Bloomberg
ING, Bloomberg
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