Filtered by Region: Europe Use setting Europe
Data released this week brought yet more evidence that the euro-zone is heading for recession. The energy crisis was already weighing on industry in July, with output in the sector contracting sharply, especially among energy-intensive producers. And …
16th September 2022
Drought conditions add to woes By far the biggest problem afflicting Europe’s energy markets is Russia’s decision to cut its natural gas exports, but extreme weather conditions are making things worse. Water levels on the Rhine are already close to their …
12th August 2022
Activity turning downwards The data published this week add to the evidence that a recession is just around the corner. Retail sales fell sharply in June and are on a clear downward trajectory. Admittedly, that might partly be because households are …
5th August 2022
According to Google it’s “kanariefugl i kulminen” Against the backdrop of heightened tensions between China and Taiwan, and ongoing question marks over whether the US economy is in recession or not, it’s fair to say that the precipitous plunge in the …
A tournament to forgot for Nordic football fans Of course, Sweden measures up well against the UK in many ways, including on the economic and political fronts. After all, the estimated 1.4% q/q rise in Swedish GDP in Q2 (data released on Thursday) is in a …
29th July 2022
Almost exactly ten years on from Mario Draghi’s “whatever it takes” speech, the ECB this week had another attempt at keeping a lid on peripheral bond spreads as it kicked off its first tightening cycle in more than a decade with a bigger-than-expected …
22nd July 2022
Danish policymakers won’t be rushed Given that Denmark’s Nationalbank operates an exchange rate peg with the euro, it was no surprise to see it mirror the 50bp rate hike by the ECB on Thursday afternoon. If anything, the only surprise was that it took …
The apparent race to the bottom on taxes slowed this week with the candidates that had pledged to loosen fiscal policy the most if they became Prime Minister either withdrawing from the contest or being eliminated in the first two rounds of voting by MPs. …
15th July 2022
Monday went from bad to worse in Norway Monday proved a day to forget for Norwegian economists and football fans, with another increase in core inflation in the morning compounded by an 8-nil drubbing by England in the evening. Admittedly, the increase in …
Energy rationing now a growing downside risk Governments ramped up efforts this week to prevent possible shortages of energy during the winter. But with the threat of lower Russian gas flows increasing, there is a growing risk of energy rationing that …
New forecasts We published our quarterly European Economic Outlook this week, which contains all of our latest forecasts for the euro-zone, its member states and the ECB. In this Weekly , we will highlight three of our key calls on the economic outlook. …
MNB pulls out all of the stops to support the forint Hungary’s economy is now under substantial pressure. The forint has slumped and interest rates have been hiked aggressively. The only way through this is to accept the pain of a weak currency and …
8th July 2022
Headwinds to strengthen in H2 The 0.7% m/m increase in Statistics Sweden’s GDP Indicator in May (data released on Wednesday) was stronger than we had expected and means the economy is all but certain to have grown more quickly in Q2 than the 0.6% q/q rise …
At time of writing, the euro is at its weakest in almost two decades, hovering above our end-year forecast of parity with the US dollar. As our Global Markets team explained earlier this week in the Capital Daily , the euro’s depreciation has reflected …
Weak economy may lead to looser fiscal policy There are two reasons why whoever fills Boris Johnson’s shoes as Prime Minister after his resignation this week is unlikely to significantly change the path of policy or the economy. First, all PM hopefuls …
Threat from Turkey’s corporate FX debts grows Plans announced late last week by Turkey’s banking regulator add to the growing risks stemming from corporates’ large FX debt burdens. Late last Friday, the regulator announced that corporates will no longer …
1st July 2022
Surveys of pricing intentions suggest that firms are confident of being able to both make recent price rises stick and to follow them up with further big increases over the next year. So the news that consumers have a slightly smaller savings buffer than …
Riksbank eyeing a sharp but short tightening cycle The Grand Départ of the Tour de France from Copenhagen today is the first time that the race has started in a Nordic country. Fittingly, it comes in a week when the Riksbank shifted up a gear with its …
The world’s leading central bankers were in a hawkish mood when they gathered for the ECB’s conference in Sintra this week, and President Lagarde was no exception. In her most emphatic rejection of the transitory view so far, Lagarde said she doesn’t …
New ECB forecasts Fears about a possible US recession have prompted investors to revise their interest rate expectations down this week, but we have pushed ours up. We now forecast the deposit rate to peak at 2% next year. (See Chart 1.) Chart 1: ECB …
24th June 2022
This week’s economic news didn’t appear to satisfy the criteria of “indications of more persistent inflationary pressures” that the Monetary Policy Committee (MPC) said last week would prompt it to act “forcefully”. As a result, market interest rate …
Hello “faster rate rises”, Goodbye “gradual” Chart 1: Use of “Gradual” in Norges Bank’s Monetary Policy Assessment or Equivalent (Number) Sources: Norges Bank, Capital Economics All eyes were on Oslo on Thursday morning as the Norges Bank delivered a …
Assessing the risks from a more hawkish US Fed The 75bp interest rate hike by the US Fed this week and expectations for further large hikes in the coming months have caused turmoil in global markets and will have ripple effects across Emerging Europe. We …
17th June 2022
A shock, albeit with a small “s” It goes without saying that the FX market reaction to yesterday’s surprise 50bp rate hike by the SNB was far more muted than that in the days following the Frankenshock in 2015 (when the franc surged by about one-fifth …
Words need to be followed by actions The ECB pulled off a neat trick this week: arresting the sell-off in peripheral bond markets without announcing very much at all. But there’s only so long that markets will be soothed by encouraging words about a …
Turkey: anything but rate hikes The Turkish lira remained under pressure this week and officials unveiled on Thursday a raft of measures aimed at tackling inflation and bolstering the currency. The Treasury revealed that it will issue lira-denominated …
10th June 2022
Farewell Stockholm, hello Basel It was announced this week that Cecilia Skingsley will up sticks from Stockholm to Basel in August and leave her role as First Deputy Governor of the Riksbank to head up the BIS’s Innovation Hub. It’s fair to say that Ms …
The ECB announcement yesterday that it intended to raise rates in July came as little surprise given the communications from ECB officials over the past few weeks or so. More interesting was the ECB’s strong suggestion that after the planned 25bp rate …
As former Prime Minister Harold Wilson once said, “a week is a long time in politics”. At the start of the week the current Prime Minister, Boris Johnson, was fighting for his political life with 41% of his own MPs voting to remove him as leader of the …
Enough has been said elsewhere about how the leap in euro-zone inflation in May is making it difficult for the ECB, which will need to explain next week why policy rates are still negative. So in this Weekly we will turn our attention to how inflation is …
1st June 2022
The unexpectedly strong rise in unsecured borrowing in April adds to the evidence that consumer spending hasn’t collapsed, despite the plunge in consumer confidence and fall in households’ real incomes. (See Chart 1.) Chart 1: Consumer Confidence & …
EU oil embargo not a disaster for Russia After weeks of intense negotiation, the EU eventually agreed to impose an embargo on seaborne imports of Russian crude and petroleum products that will likely result in a 90% fall in Russian oil exports to the EU …
One is not amused by King Harald V’s luck With the UK gripped by Jubilee fever, it is worth pointing out that Sweden, Norway, and Denmark are also constitutional monarchies whose current rulers have been on the throne for decades. It is hard to compare …
Russia and default (yes, we’ve been here before!) A Russian sovereign default moved a step closer this week after the US government decided not to extend a waiver that allowed US investors to receive debt payments from Russia’s government. We looked at …
27th May 2022
There are some question marks over quite how big the fiscal stimulus announced by the Chancellor yesterday proves to be. Much depends on whether the 25% levy on the profits of oil/gas producers lasts beyond the next year, which Sunak said would happen if …
Nordics to follow ECB (following the Fed) The change to our ECB forecast this week (see here ) has big implications for Scandinavian central banks so we are now formally changing our projections for the Riksbank, Norges Bank and Nationalbank. (See Key …
Contraction in Q2? The euro-zone PMI survey for May, published this week, suggested that the economy may fare a little better in Q2 than we had assumed. Indeed, the Composite index remained well above the 50 “no change” mark, leaving it consistent with …
Hungary: policymakers seek to fight imbalances Officials in Hungary sought this week to reassure investors that they will tackle inflation and mounting macro imbalances. Tighter policy is needed, which underpins our below-consensus growth forecasts. In a …
20th May 2022
This week’s news on the euro-zone economy has continued to be pretty gloomy. Admittedly, there was a small upward revision to Q1 GDP (to 0.3% q/q) which means the economy will not fall into a technical recession in the first half of the year. And …
Another week, another set of target-busting inflation figures, with CPI inflation shooting up from 7.0% in March to a 40-year high of 9.0% in April. (See here .) In contrast, the rise in the euro-zone was smaller, with inflation ticking up from 7.4% in …
50bp is the new 25bp? It was a quiet week on the data front, but we had plenty of comments and speeches from policymakers to pick through – notably from three of the members of the Riksbank’s Executive Board. Deputy Governors Henry Ohlsson and Martin …
Gas supply concerns remain The threat of gas supplies from Russia being cut off continued to rise this week. First, Ukrainian pipeline operator GTSOU suspended the flow of gas through the Sokhranivka transit point, which could reduce gas supplies to …
13th May 2022
Finland, NATO, and Russian gas supplies The fact that Russia is reportedly close to cutting off the supply of natural gas to Finland in retaliation for its intention to join NATO poses a risk for Finnish industrial firms that are most reliant on gas – …
The ECB’s hawkish conversion appears to be all but complete, with more officials this week joining the ranks of those calling for rates to rise in July – some more explicitly than others. Perhaps most notably, President Lagarde said on Wednesday that she …
Following the 0.1% m/m fall in GDP in March , we now think the economy is halfway towards a recession (two quarters of falling output in a row). (See here .) If GDP was flat in April, May and June, then it would be 0.1% lower in Q2 relative to Q1. We’ve …
Making sense of the Russian ruble’s rally While the Russian ruble has weakened against the dollar today, it has been on a remarkable rally in the past week or so – it is now at a two-year high of 66/$ and is twice as valuable against the dollar compared …
6th May 2022
As anticipated, this week’s Monetary Policy Report was the third in a row in which the Bank of England revised up its inflation forecast over the next two years and revised down its GDP forecast. But it was the Bank’s dramatic cuts to its GDP forecast and …
Schlegel won’t rock the boat at the SNB The SNB announced this week that Martin Schlegel will succeed Fritz Zurbrügg as Vice-Chair of the Governing Board after Mr Zurbrügg retires at the end of July. Mr Schlegel is part of the furniture at the SNB, having …
Widening bond spreads a cause for concern We agree with investors that the ECB is likely to raise interest rates by 25bp in July. We first made the call in late March, when even the most hawkish members of the Governing Council were talking about hiking …
Hungary’s imbalances in the spotlight Hungary’s central bank this week gave its most vocal assessment yet about the risks posed by growing macro imbalances. Policymakers now seem to be moving closer towards a joint tightening of monetary and fiscal policy …
29th April 2022
