Morning Report

08.02.2013

Draghi weakened the euro

NOK & 3m NIBOR
7.60 7.50 7.40 7.30 7.20 11-Jan 1.95 1.90 1.85 1.80 1.75 08-Feb

The ECB did presented new signals at yesterday's monetary policy meeting, but Draghis statements about the importance of the euro meant that currency depreciated sharply.

ECB kept interest rates unchanged as expected at 0.75% at yesterday's monetary policy meeting. At the press conference, Draghi said that inflation will fall below 2% in the coming months. ECB also believes that the economy will gradually pick up later this year, both due to improvement in domestic demand and exports. He considers that the repayment of the first LTRO-loan reflects a significant improvement in the financial markets. ECB will still continue to offer banks unlimited access to liquidity 25-Jan and Draghi said that even after an expected repayment of the second LTRO loan, there will be plenty of EURNOK 3m(rha) liquidity available (well over 200 billion euros) in the system. The Governor said that the euro is not particularly overvalued. He considers a stronger euro as a sign of increased confidence, but considers that there are downside risks to inflation and growth ahead if appreciation continues. Norsk 10y sov. The euro depreciated markedly against the dollar during the press conference. EURUSD was trading 2.8 150 around 1.3560 ahead of the monetary policy meeting, but fell to 1.3400 in the afternoon and has been 2.6 100 left there overnight. Although the ECB focuses on downside risks, the macro data from Germany 2.4 2.2 50 continue to surprise positively. German industrial production rose 0.3% from November to December. 2.0 This was slightly better than expected last month was also revised up slightly. Together with orders 1.8 0 carts that came Wednesday confirmed thus a moderate, positive image of the German economy. This is 11-Jan 25-Jan 08-Feb clearly positive since the crisis countries of the South and France struggling.
rente Diff(bp,rha)

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Newly appointed Governor of the Bank of England, Mark Carney, was yesterday interviewed in the British parliament. His comments that the BoE ultimately will end its unconventional monetary policy (ie. quantitative easing) gave rise to a significant strengthening of the pound. In our eyes, this was a clear overreaction and the market corrected when relatively quickly again EURGBP. It would have been much more compelling if he believed that the central bank would continue with unconventional policies "forever." Furthermore Carney said that there is a high threshold for changing the monetary policy regime and that he has not conducted an assessment of whether it would be advisable to change the monetary policy framework. One reason the Carney consultation still got so much attention is probably that he previously has stated his willingness to look at nominal GDP targeting rather than the present inflation targeting. He said yesterday that this would involve greater flexibility. Yet there is nothing in the hearing to indicate that Carney will revolutionize British monetary policy. That he will make adjustments seems obvious, but it is too early to say what they want to go out on. At yesterday's monetary policy meeting of the Bank of England, both the key rate (0.5%) and the level of quantitative easing ($ 375 billion GBP) remained unchanged. This was as expected and did not cause market reactions. Although the policy was unchanged, the central bank this time published a justification for the decision. BoE said that the risk remains on the downside, not least because of the challenges in the euro zone. Inflation is expected to rise and remain above target in two years, due to increases in administrated prices and the depreciation of the pound. However, the central bank will "see through" this increase. MPC also decided that the bonds that mature 7 March (6.6 billion) will be reinvested. Next inflation report is due 13 February, while the minutes of the meeting will be released 20 February. Otherwise British manufacturing output picked up more than expected in December. Output rose 1.6% hence reversing the drop from the two previous months. Although PMI indices have also picked up, the underlying trend is still weak. From the United States came as figures showed weak productivity and high costs in the fourth quarter. However, this is a direct consequence of the very weak GDP figures do not reflect the underlying growth. Number of initial claims for unemployment benefits fell very slightly in the last week and looks to stabilize at the level before Sandy. In Brazil ended inflation in January to 6.2%, up from 5.8% in December, the highest in almost eight years. Thus, inflation is above the upper limit of the inflation target (4.5% + / -2%). It may therefore be difficult for the central bank to reduce the key interest rate (Selic) further down. Selic is now at 7.25% and the markets pricing in a relatively rapid decline to 7.0%. Governor Tombini stated that he is concerned about inflation. Chinese inflation fell as expected from 2.5% in December to 2.0% in January. Chinese exports fell by 6% m/m in January, but is up 25% y/y. knut.magnussen@dnb.no Yesterdays key economic events (GMT) 11:00 Germany Industrial output 12:00 UK Interest rate meeting 12:45 EMU Interest rate meeting Todays key economic events (GMT) 04:30 China Inflation 07:30 Sweden Manuf. Production 12:30 USA Trade balance As of Dec Feb Feb As of Jan Dec Dec Unit m/m % % % Unit y/y % m/m % Bill. USD Prior 0.2 0.5 0.75 Prior 2.5 -1.3 -48.7 Poll 0.2 0.5 0.75 Poll 2.0 0.2 -45.8 Actual 0.3 0.5 0.75 DNB 0.2

56 13 27 20 75 52 99 10 69 39 41 50 62 54 14 82 61 24 79 56 38 14 61 64 24 16 90 80 51 84 04 30 77 62 96 80 73 87 49 73 33 01 73 80 70 11 69 85 24 16 90 90

24 16 90 77

24 16 90 08 24 16 90 03 24 16 90 07 24 16 90 04 24 16 90 01 24 16 90 06 24 16 90 02

24 16 90 48 24 16 90 46 24 16 90 47 24 16 90 49 24 16 90 44 24 16 90 45 24 16 90 51

Morning Report
08.02.2013

3m LIBOR
0.20 0.15 0.10 0.05 0.00 11-Jan
EUR

25-Jan

0.31 0.31 0.30 0.30 0.29 0.29 08-Feb

USD(rha)

NOK & 3m NIBOR 7.60 1.95 7.50 1.90 7.40 1.85 7.30 1.80 7.20 1.75 11-Jan 25-Jan 08-Feb
EURNOK 3m(rha)

FX 0700 USD/JPY EUR/USD EUR/GBP EUR/DKK EUR/SEK EUR/CHF EUR/NOK USD/NOK JPY/NOK SEK/NOK DKK/NOK GBP/NOK CHF/NOK

Last 93.48 1.3516 0.8629 7.4592 8.5984 1.2300 7.4400 5.5060 5.89 86.60 99.76 8.627 6.051

Today 93.36 1.3405 0.8523 7.4606 8.5900 1.2297 7.3959 5.5196 5.91 86.22 99.18 8.681 6.020

Spot rates and forecasts In 1m May-13 Aug-13 Feb-14 FX 0700 -0.1 92 90 91 93 AUD -0.8 1.34 1.32 1.36 1.37 CAD -1.2 0.84 0.81 0.85 0.86 CHF 0.0 7.45 7.45 7.45 7.45 CZK -0.1 8.65 8.65 8.60 8.70 RUB 0.0 1.20 1.20 1.20 1.20 GBP -0.6 7.35 7.25 7.25 7.40 HKD 0.2 5.49 5.49 5.33 5.40 KWD 0.4 5.96 6.10 5.86 5.81 LTL -0.4 85.0 83.8 84.3 85.1 LVL -0.6 98.7 97.3 97.3 99.3 NZD 0.6 8.75 8.95 8.53 8.60 SEK -0.5 612.50 604.17 604.17 592.00 SGD

USD NOK 1.029 5.679 0.998 5.527 0.917 601.445 18.834 29.289 30.161 18.289 1.573 8.677 7.756 0.711 0.282 19.585 2.575 2.143 0.522 10.569 0.835 4.607 6.404 86.132 1.240 4.448

US dollar

5.7 5.6 5.5 5.4 5.3

11-Jan 25-Jan
USDNOK

1.40 1.35 1.30 1.25 08-Feb

EURUSD(rha)

NOK 1m 3m 6m 12m 3y 5y 7y 10y

Prior 1.85 1.90 2.04 2.28 2.44 2.80 3.11 3.43

Last 1.88 1.94 2.07 2.31 2.40 2.81 3.08 3.39

SEK 1m 3m 6m 12m 3y 5y 7y 10y

Prior 1.12 1.17 1.28 1.52 1.52 1.85 2.13 2.39

Interest rates Last USD 1.12 1m 1.17 3m 1.28 6m 1.52 12m 1.52 3y 1.85 5y 2.13 7y 2.40 10y

Prior 0.20 0.29 0.47 0.77 0.56 1.01 1.51 2.07

Last 0.20 0.29 0.47 0.77 0.53 0.96 1.44 2.01

EUR 1m 3m 6m 12m 3y 5y 7y 10y

Prior 0.06 0.15 0.27 0.50 0.79 1.14 1.48 1.88

Last 0.06 0.15 0.27 0.50 0.72 1.08 1.42 1.85 Last 98.93 1.62 -0.34 10y sw ap 1.75 1.75 2.00

Japanese yen

95.0 90.0 85.0

11-Jan
USDJ PY

7.0 6.0

Norw ay Prior NST475 95.20 10y yld 2.54 - US spread 0.57 3m nibor 1.85 1.85 1.85

Norw ay

25-Jan

5.0 08-Feb
JPYNOK(rha)

Governm ent bonds Last SEK Prior Last US Prior 94.65 10y 112.96 112.97 10y 97.00 2.60 10y yld 1.96 1.96 10y yld 1.96 0.65 - US spread 0.00 0.01 30y yld 3.18 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 May-13 Aug-13 Feb-14 1.10 1.10 1.10 2.25 2.25 2.50 May-13 Aug-13 Feb-14 0.35 0.35 0.35

Last Germany Prior 97.08 10y 98.82 1.95 10y yld 1.63 3.17 - US spread -0.33 10y sw ap 2.00 2.00 2.25 3m euribor 0.25 0.25 0.25

Germany May-13 Aug-13 Feb-14

May-13 Aug-13 Feb-14

SEKNOK & CHFNOK 87 86 85 84 83 11-Jan 25-Jan

SEKNOK CHFNOK(rha)

6.1 6.0 5.9 5.8 08-Feb

Equities 14200 13700 13200 12700 12200 11-Jan 25-Jan

Dow J.I.

475 470 465 460 455 450 08-Feb

Os lo(rha)

NOK sov. NST19 NST20 NST21 NST471 NST472 NST473 NST475 NST475 NOK FRA MAR JUN SEP DEC

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.66 1.70 4 19.06.2013 0.36 Last 90.27 90.36 2.03 2.06 3 18.09.2013 0.61 Oil price: (Ldn,cl) 1m 2.02 1.71 -31 18.12.2013 0.86 SPOT 117.63 117.84 1.68 1.70 2 15.05.2015 2.26 Gold price 07.02.2013 PM 1.92 1.94 1 19.05.2017 4.28 AM: 1674.3 1668.0 2.10 2.15 5 22.05.2019 6.28 Equities Today 0700 % last 2.51 2.63 11 24.05.2023 10.29 Dow Jones 13944.05 -0.3% 2.54 2.60 6 24.05.2023 10.29 Nasdaq C. 3165.13 -0.1% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6228.42 -1.1% 1.95 2.08 1m 1.88 1.88 Eurostoxx50 2597.92 -0.7% 1.95 2.08 3m 2.02 1.94 DAX 7590.85 0.1% 1.98 2.13 6m 2.10 2.07 Nikkei 225 11153.16 -1.8% 2.07 2.22 12m 2.28 2.31 OSEBX 469.24 1.1% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets