7 December Forex Market Movers

In Germany, headlines regarding politics could come back into focus, as the three-day SPD party conference kicks off today. Check out the Danske Bank 7 December Market Movers overview for the in-depth analysis of the market.

7 December, Danske Bank –  In Germany, industrial production is set to show a decent increase for October after a drop in September. A rise in factory orders yesterday continued to point to a robust recovery, as does a high level of German manufacturing confidence.

Danske Bank Research: 7 December Market Movers

  • In Germany, headlines regarding politics could come back into focus, as the three-day SPD party conference kicks off today, where SPD members will decide whether to enter renewed coalition negotiations for a ‘grand coalition’ with Angela Merkel’s CDU party.
  • In US initial jobless claims is the last piece of input on the US job market ahead of the payrolls report tomorrow. Initial claims have hovered around 240k recently, pointing to a strong labour market.
  •  In the late afternoon, ECB President Mario Draghi will participate in a press conference by the Bank for International Settlement in his role as Chair of the Group of Governors and Heads of Supervision, but this is unlikely to provide material news ahead of the ECB meeting next week.
  • Some interesting Scandi data is due today. Norway is due to release manufacturing production and in Sweden, household consumption and not least average house prices will be followed closely to gauge the temperature of the Swedish housing market.

Scandinavian markets

In Sweden, we expect October household consumption data to show some moderation given the weak retail sales number released already. Statistics Sweden is also due to release single-dwelling house prices for November and a decline seems likely given the information we have already. The housing market poses a risk to Swedish growth and the inflation outlook. The krona is feeling the pain but rates market yet to adjust, 22 November 2017.

Fixed income markets outlook

As Eonia remains elevated past the Greek bond swap (which took place on Tuesday) and the ECB’s weekly MRO allotment yesterday, the higher fixings can no longer be deemed temporary. While the fixing has ground lower since the peak at month-end, its remains 3bp above the ‘normal’ level. So far, the spillover to Euribor fixings has been limited with both the 3M and 6M increasing by 0.3bp since the first ‘elevated’ Eonia was published. However, if this is the new level for Eonia it could have a further spillover effect on Euribor.

Following a weak Bund auction yesterday there will be plenty of EUR FI supply coming to the market today. The French Trésor will tap the Nov-26, Apr-29, and Jun-39 while the Spanish Tesoro is tapping the Oct-22, Oct-27, Jul-47 and Nov-21 Linker.

7 December Forex markets Overview


EURUSD CCS widened significantly yesterday as the cost of hedging USD over the turn of the year spiked. There was no apparent trigger behind the move, e.g. USD liquidity is relatively easy compared to last year ahead of the expiry of the debt ceiling suspension on Friday. In our view, the driving force is more likely year-end balance sheet constraints, i.e. the leverage ratio, liquidity coverage ratio and payments to the resolution fund in Europe.

The wider EUR/USD CCS has together with growing US tax-reform optimism also weighed on the EUR/USD spot with the cross breaking below 1.18.


In the Scandies, yesterday was a very volatile session as markets digested a range of Riksbank board comments. In short, we think markets over-interpreted the comments and our general view remains that risk is to the upside for EUR/SEK.


NOK saw general support in yesterday’s session but erased some of its gains as the oil market sold off: the EIA

inventory report came in line with the API report from Tuesday, showing a large decline in crude stocks of more than 5mb. That would normally be bullish for the oil market, but in our view, the lower level of US stocks could spur concerns that OPEC+ will end cuts early; hence, the negative reaction.

In terms of the NOK, we see several arguments for why the cross should move higher in the months to come, hence we recommend to sell EUR/NOK

via options and buy the NOK/SEK spot outright.


GBP is likely to remain volatile and very sensitive to Brexit-related news ahead of the EU Summit next week. The market’s expectations of further progress in negotiations have eased slightly, but the cross would still spike higher if EU leaders decide that there has not been sufficient progress made to proceed to the second face of negotiations. In case of positive surprises, EUR/GBP could decline and test the key support level at 0.8746.

All in all, however, we still see the cross within the 0.8650-0.90 range in the coming months as it is still too early in the negotiations to reprice Brexit risks significantly. In particular, a reassurance that a cliff edge Brexit is avoided matters more for the GBP. Hence, longer term, the case for a lower EUR/GBP in 2018 remains intact as Brexit uncertainty clarifies and we are short EUR/GBP via options (1Y put spread) as one of our FX Top Trades for 2018.

7 December Market Movers Forecast


This research report “Market Movers Today” has been prepared by Danske Bank A/S (‘Danske Bank’). The author of the research report is detailed on the front page.

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