CENTRAL BANKS: Riksbank Breman Appointed New RBNZ Governor – Things To Note
Sep-24 06:48
The NZ government has appointed Riksbank First Deputy Governor Anna Breman to be the new RBNZ governor. Breman will start the position on December 1 of this year on a 5-year term. She will leave the Riksbank on October 10.
- Breman is an experienced economist, previously Chief Economist and Global Head of Macro Research at Swedbank before her time at the Riksbank (alongside roles in the Swedish Ministry of Finance and the World Bank). She joined the Riksbank in 2019, becoming the Board’s number 2 in 2022. Three points to consider around Breman’s transition into her new role:
- Mandates: The Riksbank and RBNZ have similar mandates. The RBNZ aims to keep inflation “between 1% and 3% on average over the medium term, with a focus on keeping future average inflation near the 2% target midpoint.”. Meanwhile, the Riksbank targets a 2% inflation rate, with a “variation band” of 1-3% (note: “Without neglecting the inflation target, the Riksbank shall moreover contribute to a balanced development of output and employment”).
- Note that in recent monetary policy deliberations, Breman has been one of the more dovish members of the Executive Board. She has advocated for additional rate cuts to support economic activity given inflation is considered to be consistent with the 2% target in the medium term (that rate cut was delivered at yesterday’s decision).
- Rate Path Projections: Both central banks publish a rate path once a quarter to supplement monetary policy communications. During her time at the Riksbank, Breman actively highlighted the uncertainty surrounding rate path projections, particularly further out the forecast horizon. The Riksbank has formally communicated that the first three quarters of a new rate path projection is “owned” by the Executive Board (and is intended to be a policy rate signal), while the rest of the curve is a function of staff models, and should not be over-interpreted as a signal.
- Alternative Scenarios: In its quarterly MPR reports, the Riksbank usually provides at least two alternative scenarios for the policy rate, GDP and CPIF inflation. While not an explicit policy signal, these scenarios are meant to illustrate the most pressing risks currently facing the central bank’s mandate, and possible reaction functions. Breman has stressed the usefulness of these scenarios in internal and external communications, so could consider introducing a similar framework at the RBNZ.
- The Riksbank Executive Board will have four members until Breman’s replacement is appointed, with Governor Thedéen holding the deciding vote in the case of a tie. With the Riksbank now widely expected to be at the end of its easing cycle, this shouldn’t have a major impact on market expectations for the policy rate.
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Historical bullets
EQUITY TECHS: E-MINI S&P: (U5) Bull Phase Intact
Aug-25 06:36
- RES 4: 6600.00 Round number resistance
- RES 3: 6572.45 2.0% 10-dma envelope
- RES 2: 6523.63 1.764 proj of the May 23 - Jun 11 - 23 price swing
- RES 1: 6508.75 High Aug 15 and all-time High
- PRICE: 6479.50 @ 07:25 BST Aug 25
- SUP 1: 6362.75 Low Aug 20
- SUP 2: 6313.25 Low Aug 6
- SUP 3: 6298.61 50-day EMA
- SUP 4: 6239.50 Low Aug 1
The dominant uptrend in S&P E-Minis remains intact and Friday’s rally reinforces current conditions. Moving average studies are in a bull-mode position, highlighting a clear uptrend and positive market sentiment. Attention is on 6508.75, the Aug 15 high and the bull trigger. Clearance of this level would confirm a resumption of the uptrend and open 6523.63, a Fibonacci projection. Support to watch lies at 6298.61, the 50-day EMA.
WTI TECHS: (V5) Still Looking For Weakness
Aug-25 06:30
- RES 4: $77.85 - 2.794 proj of the Apr 9 - 23 - May 5 price swing
- RES 3: $75.65 - 2.500 proj of the Apr 9 - 23 - May 5 price swing
- RES 2: $74.25 - High Jun 23 and a bull trigger
- RES 1: $63.84/69.36 - 50-day EMA / High Jul 30 and key resistance
- PRICE: $63.83 @ 07:19 BST Aug 25
- SUP 1: $61.29 - Low Aug 13
- SUP 2: $57.71 - Low May 30
- SUP 3: $54.80 - Low May 5
- SUP 4: $54.03 - Low Apr 9 and a key support
A bear cycle in WTI futures remains intact and recent short-term gains appear corrective - for now. A key support at $61.99, the Jun 30 low, has been breached, strengthening a bearish theme. A continuation lower would open $57.71, the May 30 low. Key short-term resistance has been defined at $69.36, the Jul 30 high. Clearance of this level would cancel a bear theme. Initial resistance to watch is $63.84, the 50-day EMA.
EGBS: Bund futures back to pre-Powell levels
Aug-25 06:25
- Bund futures have drifted lower in pre-European trading and at the time of writing are 26 ticks lower than Friday's official close and have returned to similar levels seen before Fed Chair Powell's prepared remarks were published at 15:00BST on Friday at 129.18 at the time of writing. 10-year Bund yields are up 2.2bp at 2.744%.
- As noted in our previous bullet there was nothing relevant for near-term monetary policy from ECB's Lagarde at Jackson Hole (nor really from BOE's Bailey or BOJ's Ueda).
- From a technical perspective, a bear threat is present and a clear breach of 128.84, the Jul 25 low and a bear trigger would open 128.40 initially, the Apr 9 low. Strength above the 50-day EMA of 129.83, is required to signal a reversal. Near-term resistance at the 20-day EMA is at 129.51.
- With the UK bank holiday today (closing UK fixed income and equity markets) volumes are expected to remain on the light side today.
- We will receive a couple of potentially interesting data points today, however, with the German IFO the most notable (9:00BST / 10:00CET) with Spanish PPI and Belgian business confidence both also scheduled.
- However, it is later in the week that the data calendar gets much busier with the most notable releases being French, Spanish, German and Italian flash HICP all due (as well as US GDP on Thursday and PCE on Friday).
- Today will see auctions from both the EU and Belgium while we are also likely to get an ESM syndication today or tomorrow (RFP was sent last week). We also wouldn't rule out an Austrian mandate today, with the potential for a transaction any time between now and mid-October.
