Julius Baer: Comentarios Banco de Japón, Suecia y Petróleo

Redacción - Jueves, 21 de Diciembre

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Bank of Japan: More of the same The bank of Japan is another central bank which is faced with a robust growth outlook but very benign inflation backdrop. As a consequence, the Bank of Japan decided yesterday to stick to its aggressive easing strategy with zero interest rates, a negative deposit rate and targeting bond yields close to zero. Everything else would have strengthened the yen massively. We expect monetary policy to remain unchanged in Japan for the coming months, keeping the yen undervalued, and stick to our neutral outlook for the currency.

No change in Bank of Japan policy means a steady outlook for the yen.

 

Susan Joho, Economist, Julius Baer

 

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Sweden: Riksbank ends asset purchases, normalisation of monetary policy in sight

 

At yesterday’s monetary policy meeting, the Riksbank decided not to extend its asset purchases further, leaving the level of the purchasing programme at SEK 295bn. With underlying inflation back at the Riksbank’s target of 2% and leading indicators continuing to signal robust economic expansion, this was a result to be expected by macroeconomic data, but it was still unclear whether the Riksbank would decide this way given its track record of preventing appreciation of the krona through an ultra-expansive monetary policy. While the Riksbank still mentions that an expansive monetary policy will be necessary over the next months to ensure that inflation stays close to target, it seems to acknowledge that economic slack has been reduced significantly, such as capacity utilisation back at pre-financial crisis levels, which allows a first step towards the normalisation of its monetary policy. Further-more, we expect that the benchmark rate will likely be raised slowly from a negative -0.5% towards zero, beginning in the second half of next year. With this move towards a slow normalisation of monetary policy, the Riksbank has finally abandoned its policy of mirroring the moves of the European Central Bank (ECB), leading to some divergence in the monetary policies of the two banks. This has been the turning point for us to become more bullish on the Swedish krona.

 

The policy of mirroring the ECB is ending in Sweden, as the Riskbank is shifting towards slow normalisation of its monetary policy in the second half of 2018. We believe that the krona’s fundamentals can finally shine through and that undervalued levels can be reduced. Our new bullish 3-month outlook is at EUR/SEK 9.60.

 

David A. Meier, Economist, Julius Baer

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Oil: Still in tightening mode

 

The closely watched weekly US oil market report provided support to prices yesterday, pushing them back towards USD 65 per barrel. Oil inventories declined more than expected, partly driven by an increase in exports, which reached one of the highest levels on record. Looking ahead, we see today’s tightening of the oil market slowing and partially reversing. While the past months’ oil price rally gave the Organization of the Petroleum Exporting Countries’ (OPEC) a boost of confidence, it remains for from controlling the oil market. The group’s supply deal should be seen in perspective as there were two allies easing the pain of dwindling cash flows for the oil-producing countries: the global economy and financial markets. The solid global economy is thirsty for oil. Growing demand has been the driving factor of tightening oil supplies. That said, Western world oil demand growth is set to slow as the business cycle advances. Simultaneously the oil market mood has brightened since summer. Hedge funds bought significant volumes of long futures positions which provided additional fuel to the rally. Once the tightening trend stalls, this bears significant risks of profit-taking. Oil’s rally looks temporary and prices are set to fall back into a trading range around the mid-50s. Global supplies should remain ample as US oil production is on track to surpass historic highs next year. Shale oil production costs, which are the medium to longer-term anchor for prices, should stay in the high 40s as cyclical cost inflation is largely contained by continued productivity and efficiency gains.

 

Oil prices moved back towards USD 65 per barrel as declining US oil inventories support today’s tightening trend. This trend should slow and partially reverse as the oil market should remain well supplied with US oil production on track to surpassing historic highs. The very bullish market mood bears significant risks of profit-taking.

 

Carsten Menke, Commodities Research Analyst, Julius Baer

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