Fra Danske Bank:
Sofie Liv Petry, [email protected] , Assistant Analyst
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The potential for talks between the US and Iran over the weekend to reach an agreement will be in focus, as a ceasefire between Israel and Lebanon was reached yesterday. We expect the two sides will agree on an extension to the temporary ceasefire, while a more permanent peace deal will take more time.
Early Monday morning, China will announce the 1-year and 5-year Loan Prime Rates (LPR). While we expect monetary easing in the coming months, we look for the LPRs to be unchanged this time. The LPRs normally change only following changes in the 7-day reverse repo rate, which has not been adjusted since May last year.
Have a great weekend!
Economic calendar
In the euro area, the final HICP inflation data was slightly higher than the flash release with headline at 2.6% y/y compared to 2.5% y/y in the flash, mainly due to rounding. Core inflation confirmed the flash release of 2.3% y/y. The rise in inflation was due to higher energy-related expenses. Hence, the data does not change the picture compared to the flash release and in isolation supports a hold in April, although the future inflation prints will be much more important for the ECB than the March one.
Furthermore, an ECB sources story revealed that the Governing Council is leaning towards keeping interest rates unchanged in April as it is too early to give a verdict on the consequences of the Iran war. Schnabel also stated that the ECB can afford to take time to analyse the shock and that they do not want to impose unnecessary costs on the economy. This has decreased the likelihood of an April hike with markets pricing in 5bp worth of hikes. We have adjusted our ECB call and now expect hikes in June and July. Read more in: Reading the Markets EUR – From spring hikes to summer hikes; receive 2Y1Y ESTR swap , 16 April.
In the Middle East , US President Trump stated last night that Israel and Lebanon had agreed on a 10-day ceasefire taking effect at 23:00 CET yesterday. Israel’s Prime Minister Netanyahu confirmed the ceasefire. However, he also said the truce would not include troop withdrawal from Lebanon. Hezbollah, not being part of the talks, responded that the presence of Israeli forces on Lebanese territory gave Lebanon and its people the “right to resist”. This morning, Hezbollah claims that Israel broke the ceasefire overnight, by opening fire against cities in the south. The fragile ceasefire between Israel and Lebanon removes one key obstacle for the US-Iran talks. However, a number of issues remain, not least Iran’s nuclear program and the control of the strait of Hormuz. We expect the ceasefire to be extended over the weekend, but as European and Gulf officials warned yesterday, we think a more permanent deal will take months.
In the UK, February GDP growth was much stronger than expected as GDP increased 0.5% m/m in February 2026 (cons: 0.1% m/m) following a disappointing standstill in January. Services are still largely driving the progress, but car production is also back on track. Strong growth in February is well in line with the solid PMIs we saw in January/February, however, March PMIs have indicated stagnation. From what we know this far, prices have not rubbed off on wage growth. We will know more next week when we get a new labour market report. This will be key for the Bank of England outlook, where we expect them to hold interest rates for the foreseeable future.
In the US, industrial production decreased by -0.5% m/m (Feb: +0.2% m/m, cons: +0.1% m/m), which is the largest decline since September 2024, however, it was up +0.7% y/y. Manufacturing production, which makes up approximately 78% of industrial production, declined -0.1% m/m in March (Feb: +0.4% m/m, cons: +0.1% m/m), a negative after showing signs of recovery at the beginning of the year after tariffs hit manufacturing hard in 2025.
In Sweden, the Riksbank’s Per Jansson said the food VAT cut is exerting downward pressure on inflation, while higher energy costs are pushing inflation up. He therefore noted that this supply shock can largely be looked through, though vigilance remains warranted. He added that the situation remains different from 2022 as inflation pressure is now lower, demand is weaker and SEK is stronger.
Equities: Equities were higher, driven by tech-heavy US and Asia. S&P 500 rose a meagre 0.2% which was enough for a new all-time high. What was interesting, however, was the rotation underneath. While tech, communication and real estate were all >1% higher, value sectors such as industrials and banks were 0.5% lower. Software continued its recent outperformance, up over 2% and a full 13% week to date. Value indices performed decently yesterday, as the energy sector rose meaningfully. However, the story last week has been growth, not about cyclicals vs defensives per se.
FI and FX: Treasury yields moved higher throughout the US session leaving the UST10y at 4.32% this morning as the oil price climbed a little higher too where Brent crude trades at USD 98 per barrel. Fed’s Miran, the dovish outlier within FOMC, trims his forecast from four to three cuts this year. The market is pricing in c. 10bp of cuts. Within FX majors, EUR/USD has flatlined overnight just below 1.18 while USD/JPY hovers around 159. EUR/NOK continues to grind lower toward 11.00, having started the week just shy of 11.20. Meanwhile, EUR/SEK is comfortable around 10.80 for the time being. As a result, NOK/SEK is back above 0.98. EUR/DKK is stuck close to the 7.4732 level.
Later this morning we will published our monthly FX Forecast Update this time titled “USD erases war-fuelled gains as downtrend resumes “, 17 April. Over the past month, EUR/USD has retraced its war-linked move lower, now trading around the 1.18 mark. In short, we have revised our 1M and 3M EUR/USD forecasts to 1.18 and thus look for the cross to stay around current level in the short-term. In the longer term, we expect a higher EUR/USD, driven by three key factors: a drop in carry as ECB hikes and Fed cuts are expected this year, normalisation in oil prices, and relatively higher US inflation. For EUR/SEK, we leave our forecast profile unchanged, forecasting EUR/SEK at 11.00 in 6-12M. For EUR/NOK, we remain skeptical with respect to the longevity of the rally and thus leave our forecast profile unchanged this month keeping an upward slope in 6M and 12M. For the rest of our forecasts please see the full piece.
See also our in-depth FI and FX morning comment *
Sweden: Inflation forecast – Downside surprise in March and updated Riksbank call , 17 April
Reading the Markets Sweden , 17 April
Reading the Markets EUR – From spring hikes to summer hikes; receive 2Y1Y ESTR swap , 16 April
Reading the Markets Denmark: The energy crisis has not hit consumption , 16 April
China Headlines – Solid exports and end to deflation, rising Chinese role in Iran war diplomacy , 15 April
Reading the Markets Norway. NGB auction preview: Norges Bank to sell NOK3bn in NGB 1.75% 2029 and NGB 4.125% 2036 , 14 April
Report completed: 17 April 2026, 07:00 CEST
Report first disseminated: 17 April 2026, 07:30 CEST
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