EU Mid-Session Update: Central Banks in focus

Equities

European equities are marginally higher across the board, aided by the Fed’s hawkish rhetoric which led to a weaker EUR. The banking sector noticeably out-performers amid the increased likelihood of a FOMC December hike, with Commerzbank extending on gains after UniCredit showed interest in a deal with the German Bank. Further reports circulated that the German Government favours a merger between the Commerzbank and France’s BNP Paribas, seeing an evident bid in the French giants.

Fixed Income

Global bonds trade around lows, following the previously stated Fed rhetoric. The UK 5-year yields have touched their highest levels since the Brexit vote. The weakness in Europe this morning has led to dealers liquidating longs, further adding to the selling pressure.

FX

The Central Bank theme continued today, noticeably from Scandinavia, as participants saw Minutes from Riksbank and an Interest Rate decision from Norway. The former noted that several board members highlighted the issue of an overheating economy, yet did note that there are no current signs of this. The SEK still saw a bid on these comments, as there is evident chatter of an overheating economy. The move was quickly retraced, as EUR bulls do remain in the market and the concerns of a heating economy were seemingly not an immediate concern.  

EUR/NOK saw a much firmer move following Norway’s interest rate decision, with increases to the medium term key policy rate resulting in EUR/NOK falling around 60pips.

21 Sep 2017 - 10:02- Fixed IncomeResearch Sheet- Source: RANsquawk

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