Yen drops to 1986 low

In focus today

Today focus will be on the Riksbank's policy rate announcement at 09.30 CEST followed by a press conference at 11.00 CEST. The Riksbank is widely expected to leave the policy rate unchanged at 3.75%. We stick to our call for the next rate cut coming in September, followed by quarterly cuts of 25bp, bringing the policy rate to 2.25% at the end of 2025. Market focus will instead be on the updated rate path projection and inflation forecast, however no major revisions to the March forecast seem warranted as May inflation surprised to the upside. For Sweden, NIER's Economic Tendency Survey is also published at 09.00 CEST.

In the US, President Biden faces former President Trump for the first time this election campaign in a 90-minute televised debate hosted by the CNN. The debate may shed more light on each of their ambitions for fiscal policy and regulation in the coming years. The debate begins at 21.00 ET (Friday 03.00 CEST).

In the euro area, we look out for the May monetary aggregates and lending data. Our focus is on the lending data as we have recently seen a rebound in the credit impulse.

The Central Bank of Turkey will announce their policy rate at 13.00 CEST. In line with consensus, we expect them to keep the policy rate unchanged at 50.0%.

Overnight we get some interesting Japanese data. These include Tokyo May inflation and industrial production. Price pressures have muted in Japan recently and Tokyo data will indicate whether this trend continued in June. Japan has been less affected by the global manufacturing recession than most due to support from the weak yen. With manufacturing PMIs close to 50 in June, we are looking for some comeback in industrial production.

Danske Morning Mail will take a summer break from 1 July to 12 August.

Economic and market news

What happened overnight

In Japan, authorities issued fresh warnings that they may soon intervene in FX markets, as the JPY continued to weaken and fell to its lowest level against the US dollar (USD/JPY) since 1986. Japanese Finance Minister Shunichi Suzuki said the government would take 'necessary steps', as one-sided rapid currency moves were undesirable, and a cause for concern in regard to the wider economy. When the yen hit a 34-year low against the US dollar at the end of April, Japanese authorities spent USD61bn intervening. The yen dropped to a low of 160.88 last night, and this morning the USD/JPY cross is trading not far from this level at around 160.4.

In China, growth in industrial profits slowed down in May, as they stood at 3.4% YTD y/y (prior: 4.3% YTD y/y). On a sector basis profits in mining had fallen the most at -16.2% YTD y/y, whereas manufacturing had increased the most at 6.3% YTD y/y.

What happened yesterday

In Europe, Italian central bank chief Fabio Panetta said that 'the current macroeconomic picture is consistent with a normalization of the monetary policy stance'. He argued that the stickiness seen in service prices was 'not abnormal in any way', saying the persistence in inflation was 'only apparent' as it merely reflected service prices rising, peaking, and falling later than goods prices.